Shell, Exxon Mobil pay $1.7 million for Somalia Oil blocks lease

MOGADISHU, Somalia - The Royal Dutch Shell and Exxon Mobil have paid a whopping $1.7 million for Somalia's oil blocks after months of intense negotiations, Garowe Online reports.

According to Somali Deputy Minister of Petroleum And Mineral Resources, Mohamud Abdulkadir Hilaal, the two giant oil and gas firms reached an agreement, effectively allowing them to take over Somalia's offshore oil blocks for 30 years.

"After 30 Years Shell and Exxon Mobil paid the first Installment $1.7 Million Rental Service Fee for their Oil & Gas Blocks In Somalia," said Hilaal.

The deputy minister further added that the Management of this Money will be guided by the newly Resource Sharing Model signed by the Federal Government of Somalia and the Federal Member States In Baidoa city last year. 

Somali controls one of the longest sea coastline in Africa, which is rich in oil deposits. However, civil war has paralyzed the country since the toppling of Siad Barre in 1991.

Prior to the coup, Shell and Exxon Mobil owned a joint venture of oil deposits in Somalia. There have been efforts to restore the business but the unfriendly environment made it technically impossible for decades now.

In June this year, Financial Times reported that the two companies were in the process of acquiring oil deposits in the Horn of Africa Nation. The reports were confirmed by the country's Petroleum Minister Mohamed Ahmed.

Mr. Ahmed had said the agreement with Shell and Exxon Mobil was “a positive step in developing a road map for them to progress their interest in developing our resources”.

Shell, which withdrew with Exxon Mobil from the country shortly before the civil war broke out in 1991, said the payment “does not affect force majeure status, which remains in place”, indicating it was not rushing back into the country.

A number of oil companies had also questioned the ministry about whether legislation will be ready in time, and the terms of the production sharing agreements.

“We are hoping for business. We have three advantages: our geographical location, promising seismic data and attractive legislation,” said Mr. Ahmed.

In March this year, Kenya furiously responded after it emerged that Somali had auctioned controversial oil deposits along the Indian Ocean coastline. The standoff led to the withdrawal of envoys from both countries.

Somali parliament passed oil bill which effectively allowed the country to mine and export the oil a month later, leading to yet another spirited fight by Nairobi.

The International Court of Justice has scheduled June 2020 for a hearing of Kenya-Somalia maritime dispute, with Nairobi keen to have out of court settlement.

But President Mohamed Abdullahi Farmajo rejected the offer by his Kenyan counterpart Uhuru Kenyatta, arguing that the international court will be the best arbiter to solve the predicament.

The latest development is likely to cause tensions between Mogadishu and Nairobi and could have a negative impact given the already fragile relationship between the two nations.

Reporting by Abuga Makori in Nairobi; Editing by Omar Nor

GAROWE ONLINE