A dealer counts bundles of Somali shilling, the Somalian currency, at an open air currency exchange bureau within the Hamarweyne open air market in Mogadishu, Somalia February 5, 2020. REUTERS/Feisal Omar Somalia’s opportunity as one of the world’s last true oil and gas exploration frontiers may soon be rekindled – creating an industry to deliver long-term economic growth and prosperity to the Somali people. The launch of the 2020 Somali Bid Round after ratification of the Petroleum Law and Resources Revenue Sharing Agreement, the establishment of the Somali Petroleum Authority (SPA) and an internationally competitive Production Sharing Agreement, all potentially herald a flurry of activity which Somalis hope will replicate the extraordinary offshore exploration success enjoyed by Guyana in recent years.
The presence of working hydrocarbon systems onshore in the north of Somalia sparked an industry rush into the country in the 1980s before the oil and gas majors were forced to declare force majeure ahead of civil war in 1991. Roll on almost 30 years, and with an updated legal and regulatory foundation in place and the promising results of two new 2D seismic surveys covering an offshore area of more than 120,000 square kilometres suggesting a multi-billion barrel reserve potential, Somalia’s Minister of Petroleum has offered seven blocks in the Bid Round. While security is likely to be a major concern to potential investors, it is worth highlighting that both seismic surveys were safely completed without a single incident. The federal government has enacted the Resources Revenue Sharing Agreement between federal states ensuring an equitable sharing of revenues from natural resources amongst all Somali citizens. Somalia fits the bill for bona fide frontier status. It is relatively unexplored, and only one offshore well has been drilled to date; Seismic surveys in 2014 and 2015, shot respectively by Soma Oil and Gas and Spectrum, were the first to map the deep offshore. Exploration studies have also occurred onshore in Somaliland in recent years. These included 2D Seismic and macro-seepage studies in 2018 and 2019 by Genel & RAK Gas. Moreover, the area shares similar geological characteristics with Kenya, Tanzania and Mozambique, where giant discoveries have been made in the past 20 years.