Prices, politics slow Somalia's oil sector development

Subject

The outlook for the oil sector.

Significance

UK-based Soma Oil & Gas has completed seismic data for offshore Somalia and stands ready to apply for exploration rights, according to an official statement. The federal government in Mogadishu is keen to acquire more data and hold a competitive bidding round, but is struggling to complete its hydrocarbons framework. Industry optimism two years ago has dissipated: the low oil price compounds existing security concerns. The most active explorer, Horn Petroleum, has suspended activities after drilling two wells in Puntland. Majors are in no rush to reclaim Somali acreage in force majeure since 1991.

Impacts

• The prospect of difficult negotiations with Mogadishu clouds the outlook for exploration in Somaliland, which has granted its own licences.
• Security concerns will prevent exploration by companies that have taken acreage in Somaliland, Puntland and elsewhere in Somalia.
• An unresolved maritime border dispute with Kenya compounds uncertainty for some of the more promising offshore fields in the south.