Somalia Oil Updates


Since I haven’t updated you on the news lately here’s all the recent news from the paywalled site I use.

Somalia readies new petroleum law
President of Horn of Africa nation set to sign new code into effect 'imminently'
Somalia will soon have a new oil and gas code with the Ministry of Petroleum & Mineral Resources insisting that suitors participating in last February’s 15-block licensing exercise should still submit bids by the 7 November deadline.

President Mohamed Abdullahi Mohamed Faramaajo is set to sign the 2019 Petroleum Law into effect “imminently”, having won over support from all the federating Somali states, according to an advisory source close to the ministry.

It is claimed the breakaway republic of Somaliland and the semi-autonomous province of Puntland are included among compliant states, all of which have agreed to revenue-sharing terms that ensure that one third of all revenue generated shall accrue to non-federal institutions over time.

In addition to the Petroleum Law, the legislature has approved a Revenue Sharing Agreement, “designed to ensure proper transparency by the Government and companies investing in the industry through robust public financial management and accountability,” said Mariam Hussein Mohammed, senior legal counsel with the African Development Bank’s African Legal Support Facility (ALSF).

It is also envisaged that some 80% of profit oil shall go to the government and 20% to the oil company after an initial period during which phased cost recovery can be achieved.

Upstream understands that the Somali Petroleum Authority, as regulator, and the Somali National Oil Company (SONOC) shall be built and staffed up as fast as early revenue streams allow.

For now, there is no mention of when the necessary regulatory schedules will be drafted and promulgated, nor if percentage scales will be introduced to incentivise exploration and production activity in difficult terrain and differentiate between onshore, shallow or deep acreage.

None of the 15 offshore blocks offered under the current licensing exercise include acreage in dispute with neighbouring Kenya.

The new law promises to create a Petroleum Registry for the multitude of legacy agreements, mainly related to concessions awarded to the majors before the civil war erupted in the early 1990s, prompting them to declare force majeure.

The Somali, Puntland and Somaliland governments have all awarded acreage to new players in the interim and it is unclear whether these may have to be renegotiated under the new regime.

“The Ministry has worked successfully with the federal member states to develop an equitable and transparent framework to develop natural resources for the greater good of Somalia and all its people,” said Minister of Petroleum & Mineral Resources, Abdirashid Mohamed Ahmed.

“It is anticipated that production sharing agreement (PSAs) can now be signed, wherein the first phase will involve planning and mobilising to acquire seismic data and the drilling of exploration wells over 2020 and 2021,” he added.

Somalia eyes new oil law despite states' doubts
Federated areas claim exercise is premature as code awaits presidential assent
Somalia President Mohamed Abdullahi Mohamed Farmajo is poised to sign into law a new oil and gas code following weeks of debate in which lawmakers argued over fiscal terms, with several federating states distancing themselves from an exercise they claim is premature.

The Petroleum & Mineral Resources Ministry this week insisted that suitors participating in last February’s licensing exercise should submit bids by the 7 November deadline under a new legal framework that meets international standards and will transform the country.

None of the 15 offshore blocks offered include acreage currently in dispute with neighbouring Kenya, and will not be “until the settlement is reached”, according to the ministry.

The two countries await the International Court of Justice ruling over the contested demarcation of their maritime border, an altercation which last month resulted in a brief diplomatic break after Kenya mistakenly accused Somalia of offering acreage in the disputed area.

A ministerial advisory source told Upstream that all of Somalia’s federating states including the breakaway Republic of Somaliland and the semi-autonomous province of Puntland were now compliant and back the new law “and this was a remarkable achievement”.

However, other sources told Upstream that neither Somaliland nor Puntland are party to this agreement and talks to bring them onboard broke down last month and were not revived, rendering moot the impact of this week’s legislation, even with presidential assent.

The 2019 Petroleum Bill seeks to update the 2008 Petroleum Act, paving the way for completing the current round with fresh acreage awards targeted by the end of 2019, but without support or constructive input from member states, the package has little chance of implementation.

It is still possible that back channels might result in reopening talks to restore confidence in attempts by the Mogadishu administration to pass the law and attendant regulations ahead of November, despite fundamental differences of opinion over autonomy.

“Somalia is facing some serious challenges and this is one of them but we hope that something reasonable emerges from all this. What is not clear at this point is the definition of Somalia,” according to an advisory source close to the recently elected Puntland administration.

Nonetheless, Somali Minister of Petroleum Abdirashid Mohamed Ahmed praised his team for having “worked successfully with the federal member states to develop an equitable and transparent framework to develop resources for the greater good of Somalia and all its people”.

In a parallel development this week, a clutch of Somali officials bearing diplomatic passports were refused entry to Kenya upon arrival at Jomo Kenyatta Airport in Nairobi.

Those officials blocked included Somali Senators Ilyas Ali Hassan and Zamzam Dahir and Minister for Water & Energy, Osman Libah, in a move that highlighted the fragility of relations between the two nations.

Somalia's new code aims for clarity and stability
Somalia's 2019 Petroleum Law currently awaiting presidential assent envisages signature of production sharing contracts by the first quarter of 2020 with fresh seismic and exploration drilling carried out through to the end of 2021, writes Barry Morgan.

According to Somali Petroleum Minister Abdirashid Mohamed Ahmed, the new law imposes revenue sharing terms ensuring that one third of all revenue generated will over time accrue to non-federal institutions.

It also ensures that 80% of profit oil goes to the government, with 20% accruing to the oil company after the initial cost recovery period.

The legislature is also debating a revenue sharing agreement “designed to ensure transparency by the government and oil companies through robust public financial management and accountability,” according to Mariam Hussein Mohammed, Senior Legal Counsel with the African Development Bank’s African Legal Support Facility. One proposal envisages the federal government retaining a 55% share of oil proceeds, 25% for the producing region with 10% for the producing district, but allowing for distribution of the remaining 10% to the non-oil producing regions.

Upstream further understands that a Somali Petroleum Authority will be inaugurated as regulator alongside a Somali National Oil Company to participate in petroleum operations, both of which are to be staffed up as fast as early revenue streams allow.

It is unclear when regulatory schedules attendant to the new law will be promulgated, nor is it known if clear fiscal differentiation is proposed between E&P carried out onshore, in the shallows or the deep offshore.

A Petroleum Registry is proposed for legacy agreements such as concessions awarded to the majors who declared force majeure before civil war erupted in the early 1990s.


Somali lawmakers debate oil law reform
Somali lawmakers in the capital Mogadishu are set to debate the Petroleum (Amendment) Bill 2019, designed to overhaul controversial revenue-sharing elements contained in the original 2018 Act, despite a lack of input from all the regions.

The semi-autonomous province of Puntland, bordering the breakaway Republic of Somaliland, and Jubbaland which shares a border with Kenya, have protested that they were not consulted before the Bill was presented to the Federal Legislature.

A source close to the Puntland administration told Upstream: "“Puntland does not recognise what is being done in Mogadishu."

The Puntland Ministry of Petroleum earlier told Upstream that a legal framework remained inadequate to support a bidding round, not was the Federal Government able to manage and supervise subsequent awards.

Among aspects lacking in the legislation were comprehensive provisions updating the tax code, royalty regime, profit oil split and a credible policy of acreage still subject to force majeure since a civil war halted exploration back in the 1990s.

The Garowe-based Puntland government is currently preparing a 2019-2023 Strategic Development Plan to develop capacity before reviving exploration and production and none of its onshore or offshore acreage was included in the licensing exercise launched in London earlier this year.

“The five Federal Member States are putting intense pressure on the central government to prevent international oil companies engaging in upstream activity until all the requisite legal framework is in place,” according to local news agency Garowe Online.

The Federal Legislature’s Lower House is primarily engaged this week in discussions designed to ease tensions between states and establish a consensus on constitutional and electoral reform.

Puntland doesn’t recognize the failed FGS.

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Engineer of Qandala
Thats good that they are going to meet on it, dialogue is always good.

What the stupid "federal government" fails to realise is that companies & investors will not back exploration until all the relevant stakeholders agree.

It's not a coincidence that they spoke to Puntland about how it feels about the situation. Nobody wants to invest in unstable countries.

Well done Nabar and Naxdin.

This leads to the other valid theory;

Certain oil rich countries nearby don't want Somalia to explore its resources therefore they are paying N&N clowns to keep beefing with the federal states so that it never happens.
Somalia passes petroleum law, paving way for exploration

Somalia passed a petroleum sector law on Monday, paving the way for exploration in its waters that could potentially transform the troubled country’s economy if hydrocarbon riches are found.

The new legislation allows for the creation of institutions to oversee the sector and for revenue sharing between the central government and federal states, among other objectives, the ministry of petroleum and mineral resources said in a statement.

“This is a landmark in the development of Somalia’s natural resources, which will be transformational for the country’s development,” the ministry said in the statement.

Update complete :)