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History of Somalia’s unexplored oil resource

BY Abdulkadir Abiikar Hussein

Somali is poised for a bumper oil harvest if its geology is anything to go by. The geology boasts of three requisites for hydrocarbon generation. This includes the source rock, the reservoir and the seal. This coupled wchaos. Sinclair Company was first to lay foundation for hydrocarbon exploration. In the seventies there was a period of slumber in the exploration as Somalia adopted socialism while joining the soviet block. The country experienced capital flight as western companies took leave only to make a comeback in the 1980s.

Chevron signed a concession agreement in January 1986 with Somalia over blocks lying along the northwest coast of Somalia. The concession area encompassed 40,509 km2 both on onshore and offshore, extending into the Gulf of Aden.

This was followed by a windfall of what mimicked a gold rush in Somalia by various companies among them Chevron, 1986 (on and offshore North-west coast, 40,509km2), Conoco, 1986 (nugaal, Sool and Togdheer, 98,700km2), Amoco, 1987 (Block 6,9 and 12 near Mogadishu, 35,0912) and Shell with Exxon Mobil, 1988 (offshore blocks from Bandar Beila to South Marka. Block M-3 and M-4.)

During this period, the then government mainly signed concession agreements.

This form of agreements often grants Oil Company exclusive rights to explore, develop, sell and export oil or minerals extracted from a specified area for a fixed period of time. Oil companies compete by offering bids, often coupled with signing bonuses for the license of such rights.

Rules regulating the extractive industry drew from the Somalia Mining Code. However a totalitarian regime reigned supreme. Despite the many years of exploration there are no lessons for the current leadership to draw from.

This period however was marked with under exploration. The few blocks that were explored were in North Eastern and North Western of Somalia.

Following the 1991 degeneration into civil war, most companies that had signed agreements declared force majeure.

The government is working to get into negotiations with the companies that had declared force majeure. Getting back into negotiations might enable the government to recoup lost revenues that might have accrued according to the contracts but this seems farfetched since the involved companies are yet to come to the table.

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