Can oil discovery change Somalia's economic fortunes?

Somalia Moves Step Closer to Reviving Oil Sector With New Terms. [Photo: Bloomberg]

MOGADISHU, Somalia - For decades, the federal government of Somalia has struggled with stability, majorly depending on international partners for survival, given the little revenue collected from members of the public due to the Al-Shabaab menace across the country.

Before the collapse of the state, Somalia was exploring oil and gas along her coastline with ExxonMobil and Shell pitching tents in the Horn of Africa nation. But over the years, these fortunes subsided, forcing the once oil-producing nation to rely on foreign oil and gas imports entirely.

But recently, Houston-based Coastline Exploration renewed efforts to explore oil and gas in Somalia, having taken seven offshore oil blocks. The Chief Executive Officer of the group Richard Anderson told S&P Global Commodity Insights that he is hopeful that more oil can be discovered in the country.

"I think the potential is there for multiple tens of billions of barrels, recoverable, or even more over time," Anderson said. "Just the areas we are looking at would be in that range, in the upside case, and that is just in our blocks."

Coastline, which paid $7 million for the blocks, will begin 3D seismic in November, Anderson said, with a view to drilling in mid-2025. This, reports indicate, may have challenged ExxonMobil and Shell to make a grand return to the country.

According to 2D seismic conducted by TGS in 2014, there could be 30 billion barrels of crude across 15 blocks initially offered by Somalia's government. The ongoing war between Russia and Ukraine has even triggered a scramble for hydrocarbons along the East African coastline.

"Today marks a major step forward for Somalia as we look to develop our energy industry which should deliver material benefits for all Somalis," President Hassan Sheikh Mohamud said following the Coastline deal in October.

"Energy independence, new tax revenues, and further foreign investment in Somalia now beckon."

Coastline first announced in February it had signed PSAs for seven blocks covering 35,000 square km, almost two years after Somalia launched its first offshore round, but Mohamud's predecessor, Mohamed Abdullahi Mohamed annulled the deal.

After taking office in May, Mohamud approved the deal and signed an agreement with Somalia's disparate states, which commentators say will prevent internal discord.

Anderson said Coastline's projects will progress in November. "The next phase is shooting a 3D seismic survey between November and March. We will then process it over three to four months," he said. "We hope to be drilling by the second or third quarter of 2025."

Crude discoveries, Anderson said, would "change the geopolitical balance" in the region. Given the potential size of Somalia's reserves, "it is an opportunity that the Somali people should not miss."

Somalia's economy will be greatly boosted should the company discover more oil and gas, with analysts insisting that the country could export the commodity in the future. Recently, Somalia won the case against Kenya at the International Court of Justice over the controversial Indian Ocean maritime border.

GAROWE ONLINE