BY SEYIFUNMI LUMEKO
Somalia’s Minister of Petroleum and Mineral Resources, H.E. Abdirashid Mohamed Ahmed, has confirmed his participation at African Energy Week (AEW) in Cape Town, where he will invite interested companies to enter into negotiations regarding the country’s significant exploration opportunities. Representing the last true frontier market for African exploration, Somalia’s geological positioning, unexplored offshore reserves, and reformed regulatory and fiscal environment have elevated the country as a notable hydrocarbon attraction, which will be promoted at AEW 2021 in Cape Town.
Somalia’s offshore potential is well known – with its proximity to the Gulf of Arab states such as Yemen and Saudi Arabia justifying significant hydrocarbon reserves. With the previously availability of new seismic data – covering an offshore area of more than 120,000km – indicating that available acreage on offer could contain billions of barrels of oil and similarly commercial quantities of gas, the country is placing exploration as a top priority. Driven by new technological advances that de-risk exploration and ensure early success, modern-day explorers are turning an eye to Somalia, and the country is welcoming international partners and inviting local companies to participate in expanding its energy sector.
With similar geological characteristics to that of Kenya, Tanzania and Mozambique, and relatively unexplored offshore areas, Somalia is on its way to becoming an oil industry giant. In a bid to drive investment, the federal government introduced the country’s first-ever licensing round in August 2020, with seven highly prospective blocks on offer. By offering attractive fiscal incentives to companies – including one of the most generous and equitable Revenue Sharing Agreements in the world – Somalia is positioning itself as a competitive destination for foreign investment.
“Somalia has managed to position itself as a competitive investment destination by reforming its regulation and establishing the regulating authority. With significant exploration opportunities offshore Somalia, the country can leverage its resources to drive wider socio-economic growth. Somalia has worked hard to establish a safe and productive sector for companies, with its recent seismic surveying progressing without a single incident. By participating at AEW 2021 in Cape Town, H.E. Minister Ahmed will hold critical discussions with key international stakeholders that will accelerate Somalia’s energy sector growth,” stated NJ Ayuk, Executive Chairman of the African Energy Chamber.
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Meanwhile, through a recently reformed and attractive regulatory and fiscal framework, Somalia is committed to establishing an enabling environment for foreign investment, driving exploration and associated economic growth. The most notable amendment was the ratification of the Petroleum Law in February 2020, redesigned in a way that protects investors money, maximizes petroleum resource exploration and exploitation, promotes cooperation between international oil companies/consortiums, and provides long-term legal and regulatory stabilization. In conjunction with amendments to the Somali Production Sharing contract model, in which emphasis was placed on achieving an investor-friendly, flexible fiscal framework and incentivizing new and sustained investment, the Petroleum law is reaffirming that Somalia is open for business. The overhaul and associated amendments have been significant for the country’s hydrocarbon sector development, ensuring increased certainty and transparency that will inevitably drive investment.
In a bid to accelerate productive exploration, in July 2020, the Ministry of Petroleum and Mineral Resources established the Somali Petroleum Authority (SPA), an entity responsible for regulating the development of the oil and gas industry by applying principles of equality, openness, accountability, transparency and non-discrimination, all in the interests of the Somali people. Already, in the short time since its establishment, the SPA has played a pivotal role in driving hydrocarbon exploration. Working hand in hand with the Ministry, the SPA remains focused on ensuring the fiscal and regulatory regime is internationally competitive while ensuring oil and gas revenues reap tangible benefits for the Somali people.
Somalia has continued to record impressive rates of growth and increasing stability in recent years, attracting more and more interest from potential investors. With a reformed sector and an established enabling environment for investors, an exciting new exploration frontier has emerged. H.E. Minister Ahmed will reiterate that the country is open for investment, and is focused on driving a productive discussion with potential investors at AEW 2021 in Cape Town about the future of Africa’s final true frontier.
