Agreement with joint venture explorer boosts Somalia’s post-conflict effort to attract IOCs to its long-delayed licensing round
Somalia reached an agreement with a Shell-ExxonMobil joint venture on 24 February that covers future exploration of offshore oil and gas blocks, according to the East African country’s Ministry of Petroleum and Mineral Resources.
The agreement enables historic concessions held by the decades-old Shell-Exxon joint venture to be converted to a new model production-sharing agreement (PSA), which was published earlier this month following the ratification on 8 February of the country’s first Petroleum Law.
“I am delighted we have agreed an initial roadmap with the Shell-ExxonMobil joint venture,” petroleum minister Abdirashid Mohamed Ahmed wrote in a statement. “This gives us confidence in [our] ability to further explore any offshore hydrocarbon potential.”
The Shell-ExxonMobil joint venture made a $1.7mn payment to Somalia last October as retrospective rent for five blocks it was awarded three decades ago under former president Mohamed Siad Barre—the blocks were never accessed due to the vicious civil conflicts that erupted following Barre’s overthrow in 1991.
“I am delighted we have agreed an initial roadmap with the Shell-ExxonMobil joint venture” Ahmed, Somalia Ministry of Petroleum
“We have a long relationship with the Shell-ExxonMobil joint venture and look forward to this continuing as we seek to provide the building blocks we need to grow our economy,” says Ahmed.
Norwegian seismic data survey company TGS has estimated potentially 30bn bl of oil lies in the 15 shallow and deepwater blocks on offer in a long-delayed licensing round that the country hopes to launch this year.
Officials are yet to advise a new timeframe for the round, which was postponed last year due to a maritime dispute with neighbouring Kenya. It covers approximately 75,000 km² and It is backed by over 40,000km² of seismic data.
A Shell spokesman told Petroleum Economist by email: “Shell EP Somalia and Mobil Exploration Somalia hold exclusive petroleum exploration and production rights over five offshore blocks in Somalia (M3/4/5/6/7) under a Concession Agreement with the Federal Government of Somalia which has been under force majeure since 1990.
“We have an ongoing and constructive dialogue with the Somali authorities about a roadmap potentially to convert the existing concession to a production sharing agreement, in line with the new Petroleum Law which is coming into effect. We continue to monitor the security and operating environment in and surrounding Somalia.”