Somalia voids first offshore oil, gas deals

US-based Coastline Exploration said February 21 it had signed seven production-sharing agreements (PSAs) covering deepwater blocks off the coast of Somalia – the first deals to cover offshore oil and gas development in the east African country. But while petroleum minister Abdirashid Ahmed hailed the agreements as "a huge moment for Somalia," the country's prime minister Mohamed Hussein Roble has slammed them as "illegal and unacceptable," and its president Mohamed Abdullahi Farmaj has declared them void.

Coastline states on its website that it was founded in 2018 "to help develop the hydrocarbon industry within east Africa," although it does not list any assets. In a statement, its CEO Richard Anderson said the Somali government and its petroleum ministry had "spent a great deal of time and effort to ensure the country has the proper legal and administrative infrastructure to support oil and gas exploration."

Somalia passed a petroleum law in 2019 and has adopted revenue sharing agreements as a means of governing upstream developments. The country launched its first-ever offshore round in May with the offer of the seven blocks, but awards were delayed because of the coronavirus pandemic and weak market conditions.

Coastline went through a "rigorous negotiating process" to sign the PSAs, Anderson said.

"The way is now open for other oil and gas companies to join us in our quest for commercial discoveries through the current licensing round and, also through direct negotiations with the Somali oil and gas authorities," he said.

Roble responded saying on social media that the the PSAs were "illegal [and] unacceptable, since it wasn't done through legal avenues."

"I will take all appropriate measures to protect our national resources," he said. 

Shortly afterwards, president Farmajo issued a statement saying the presidency had nullified the deals, as they contravened a presidential decree that prevents the signing of such agreements during elections "so as to protect public resources from exploitation during the elections."

Parliamentary elections have dragged on in Somalia since November last year, but are due to end on February 25. Presidential elections are scheduled to take place on the same day, after being delayed by three months because of an ongoing political crisis that has seen mass anti-government protests.