Somalia to Launch Offshore Round

Somalia is preparing to launch its first offshore licensing round, offering up rights to seven blocks, its ministry of petroleum and natural resources said on May 12. The round will open on August 4 2020 and companies will have until March 12 2021 to submit bids for exploration and production rights.

The hope is that the country's offshore, with its wide variety of geological plays, will propel the country to the premier league of east African resource holders, such as Mozambique or Tanzania. There is also seismic data for the seven blocks, shot in the last few years, for bidders to analyse.

But the round comes at a time when Brent is trading at only $30/b, having shed more than half its value since the start of the year due to the collapse in oil demand caused by Covid-19 lockdowns. Despite the market crisis, petroleum minister Abdirashid Mohamed Ahmed described the opportunities for oil majors off Somalia as "enormous."

"Somalia is committed to attracting investment and promoting partnership and business in all segments of the oil and gas industry value chain," he said in a statement. "This event is the starting point to allow the Somali government to better showcase the vision that our country has for our petroleum and gas industry to potential foreign investors."

Somalia ratified its petroleum law in February, setting out how revenues from oil and gas production will be distributed between the federal government, the states and local communities. It also establishes the relationship between the upstream regulator, the government and the state-owned oil company, SoNoc, which will be carried or have a working interest in the blocks.

The legislation also introduces a model for production-sharing agreements (PSAs) and seeks to provide "fair treatment" to holders of concessions prior to 1991, when former dictator Mohamed Siad Barre was overthrown. Contracts signed later are void, Ahmed said at the online launch of the roadshow, but those signed earlier will be recognised and may be converted to PSAs.

Somalia in March agreed on an initial roadmap with a joint venture between ExxonMobil and Shell on offshore exploration and development. The pair held rights to five offshore blocks before Barre's removal from power. 

Once bids are selected and blocks awarded in the new round, Somalia will negotiate and sign PSAs with the winners.