Home Economy Somaliland: Sizing Up Somalia the new Offshore Oil Frontier in the Making

Somaliland: Sizing Up Somalia the new Offshore Oil Frontier in the Making

Somalia offshore oil blocks 2020

Somalia is one of the few remaining frontier oil and gas exploration territories and the Somalian federal government is promoting its advancement by launching its first ever offshore licensing round. We look at the latest developments.

Since the late 60s, civil unrest has prohibited the exploitation of Somalia’s offshore oil and gas resources. Now, however, after several years of relative peace, the government is making a bid to attract foreign investment to develop the country’s oil and gas riches.

In May, Somalia’s Ministry of Petroleum and Mineral Resources launched its first offshore licensing round, featuring up to seven blocks that can be bid for between August 2020 and March 2021.

According to seismic data processing company Spectrum, which acquired approximately 20,000 km of long-offset 2D seismic data offshore Somalia in 2015, there are strong indications of widespread distribution of good quality source rocks. Meanwhile, another subsurface data company, TGS, estimates un-risked resources for the Somali Basin could be around 30 billion barrels of oil. TGS has acquired more than 40,000 kilometres of 2D data, which covers the seven blocks on offer,

Overall, the country, located in the Horn of Africa and bordered by Kenya and Ethiopia and close to Yemen, is a promising new frontier for oil exploration; it is not without its risks and challenges though.

New activity 

Oil and gas exploration started in Somalia in the 1950/60s, with a total of 70 wells drilled, 80% of which were onshore. Many major companies, including ExxonMobil, BP, Texaco, and Shell, were active in the region at the time. In the 60s, before civil unrest stifled the sector, five discoveries were made but all were considered sub-commercial.

As such, Somalia, which relies heavily on fossil fuels for its energy supply, does not produce oil. Keen to change this fact,  the government ratified a new Petroleum Law in February, revoking the one passed in 2008.

The law established the Somali National Oil Company, which will participate in petroleum operations, as well as the Somali Petroleum Authority, which will act as a regulatory body overseeing oil and gas activity.

The author Siva Prasad, is senior analyst at Rystad Energy