Somalia: Potential Frontier for Oil and Gas Exploration in 2013

Published on 7th January 2013

Somalia intends to move forward and give hope to its citizens. In order to do that, it must earn revenue to provide the basics: build sustainable peace, improve security for everyone in Somalia and provide public services: education, health, sanitation, access to clean water and build infrastructure. Resources that can generate revenue include the development of livestock, fishery, agricultural products, minerals, oil and gas in addition to collecting taxes from property, income, payroll or workforce, corporate, capital gains, wealth, goods and services, value added tax (VAT) and many other types of taxes.

Somalia hopes to gain revenue from oil and gas, currently hidden underground Somalia (onshore) and below the Indian Ocean-floor (the offshore). More than two decades ago (in the eighties), there was an “oil and gas exploration rush” to Somalia, driven by the country’s huge oil and gas potential. The rush was led by Conoco-Phillips, Shell (Pectin), Amoco, Eni, Total and Texaco, who left the country in “force majeure” waiting to come back at the right time, security wise.

In a recent meeting, the Minister of Resources said, “Given that the security condition of the country is improving at a rapid speed and the presence of a legitimate transparent government, companies of the past and the new ones are all welcome. Somalia will be open for business in 2013 and we honour the agreements of the companies who filed “force majeure” and left the country due to the civil war. We are now working to review the Petroleum Law and make it more competitive and attractive to oil companies and investors.”

Somalia is aware of the recent oil and gas discoveries in Kenya, Uganda, Tanzania and Mozambique and it is determined to join the race for oil and gas production. In addition to the “giant” oil companies, currently there are small companies who are aggressive risk-takers who want to start and get hold of their share before the giants come to play. The “giant oil companies” seem to be reluctant and shuffling their feet at the moment. In getting ready for business, Somalia needs to carry out institution building: establish the Somali Petroleum Authority (SPA) in accordance to Article 8 of the Petroleum Law of Somalia. SPA is the competent authority that regulates petroleum operations in Somalia by ensuring that all activities from exploration, production and marketing adhere to the requirements of the Petroleum Law. Somali Petroleum Corporation (SPC) exists already but it may need re-structuring so that it meets the high expectations of the current government.

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By Abdulkadir Abiikar; London, UK
E-mail: kadir.abiikar@hotmail.co.uk


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