Commercial drilling for Somali oil is years away

Subject

Somalia's oil sector.

Significance

Somalia plans to hold a licensing round for permits off its southwest coast this year; the blocks to be offered in 2017 are not yet delineated. While the acreage to be offered will likely prove uncontentious, the auction will highlight tensions and uncertainties as the federal government seeks to establish its federal and regional authority. Firms looking to enter the nascent sector may confront a difficult operating environment.

Impacts

• Operating in Somalia will require managing high reputational and practical risks, including security.
• Maritime piracy has diminished, but oil developments could spur new forms of insecurity, including from al-Shabaab.
• Large-scale corruption could prove more damaging compared to other states given Somalia's minimal track record in the energy field.