It is considered one of the poorest countries in the world in terms of income per capita and the least developed on the entire planet, according to the Human Development Index carried out each year by the UN. decades of civil warDisastrous resource management and political fragmentation have transformed the country into a kind of failed state, dominated by criminal gangs, warlords and pirates (often linked), in which nearly seven out of ten people live in poverty. This extreme situation led Somalia to become known worldwide as the land of pirates. Although the situation is far from improving in the short term (piracy seems to have reappeared in recent months), the seas that these pirates sail could hide a treasure much more precious than the one they are looking for. The waters of Somalia are part of what is known as “next oil frontier” with part of South America. A little or unexplored territory that could contain billions of barrels of crude oil, a treasure that, if well managed, could help boost the economy of this African country.
Currently, hundreds or Thousands of Somalis risk their lives every day in the Red Sea and the Gulf of Aden…and other key points of maritime transport that try to attack ships with aggressive practices. Everyone’s bread A day in the waters near Somalia goes like this: dozens of fast boats carrying pirates looking for easy prey in the waters belonging to the Indian Ocean. Meanwhile, the vigilant and fearful crews of bulk carriers, oil tankers… remain on alert to send a distress signal and use the direct telephone line they have with the frigates that monitor these waters.
From piracy to oil
Although many attacks are avoided, as explained Reuters In a report published a few months ago, it often happens that no one arrives in time. Pirates board ships, fire several warning shots and take the captain and officers hostage, while the pirates take everything they can. According to marine risk managers and insurers, pirate attacks are much rarer today than in the period 2011-2014 and pirates mainly attack small ships in less patrolled waters. International monitoring has succeeded in reducing the problem, But piracy remains a current issue for a Somali people still mired in poverty.. Therefore, the possibility of developing an industry around the alleged oil reserves in these same waters could be the definitive solution to this problem if adequate management is carried out and has an impact on the local population, which does not always happen.
Instability, piracy itself and wars have been preventing foreign investment from coming to this country for years. This lack of investment is the main reason why oil is still not produced in Somalia. The risk of operating in such dangerous waters and without any type of security or legal protection was not worth it for the companies.
From S&P Global, they explained in a note that in recent times “There has been a renewed interest in exploration deposits in Somaliaone of the last frontiers of global oil and gas development, with energy security back on the political agenda in the East African country after years of conflict and instability. “Somalia wants to ride this wave and follow in the footsteps of other “sister” nations like Senegal.
The History of Somali Oil
The history of Somalia’s oil goes back a long way and may be reminiscent in part of the legendary city of El Dorado, but with oil… there has been talk for decades about the treasure that lies within Somalia, but no one has yet seen a single drop of this ‘black gold’. International oil companies, such as Chevron, Eni, ExxonMobil and Shell, began exploring Somalia in the 1950s, but withdrew when the country was plunged into a bloody civil war in 1991.
However, today, Houston-based Coastline Exploration is leading the initiative that seeks to reclaim this exciting project, to have acquired seven offshore blocks from the Somali federal government in 2022With today’s technology and greater peace of mind, this company wants to extract Somalia’s “liquid treasure.”
Richard Anderson, the company’s chief executive, said, “They think there’s potential for tens of billions of barrels, recoverable, and more over time,” Anderson said. “The only areas we’re looking at would be in that range, if there’s an upside, and that’s just our blocks.” Coastline, which paid $7 million for the blocks, will begin conducting 3D seismic surveys in November, Anderson said, with an eye toward drilling in mid-2025.
Meanwhile, rumors are circulating in the industry that ExxonMobil and Shell are considering returning to Somalia. For now2D seismic analyses reveal that there could be up to 30,000 million barrels of crude oil in the 15 blocs initially proposed by the Somali government.
Although there is still time for oil to become a stable and sustainable source of income, some symbolic advances have already taken place and are beginning to raise great expectations in the country. In early 2024, Abdirizak Omar Mohamed, Somalia’s Minister of Petroleum and Mineral Resources, assured that “Somalia will start producing oil on its territory for the first time in its history at the end of this year.”
Waiting for the first barrel of oil
The Somali government hopes that the first barrel of oil will be extracted from fields in Galmudug, South West and Jubaland states. In October 2022, Somalia signed an agreement to develop its oil reserves with the American company Coastline Exploration. The agreement, based on a production sharing principle, gives Coastline Exploration the right to explore for oil in seven blocks. Geoseismic studies, confirmed by the United States, have shown that Somalia has potential oil reserves. and natural gas equivalent to several tens of billions of barrels.
The anticipation is such that other companies are beginning to negotiate with the Somali government to obtain new licenses in other frontier blocks that Coastline Exploration is analyzing. As is the case in little Guyana, once quality oil is found in unexplored blocks, it does not take long for the “vultures” to arrive to try to recover what is left or to look for new oil deposits.
In the case of Somalia, it was the Turkish state-owned Ottoman company that announced that it would send a seismic vessel in the coming weeks to begin initial exploration work in Somalia. Three offshore blocks recently awardedThe move is part of a broader deal between Ankara and Mogadishu under which the Turkish navy will provide maritime defense services and training for two years (based on a 10-year relationship) in exchange for secure access to three offshore exploration blocks.
Turkish Energy Minister Alparslan Bayraktar said that Turkish Petroleum would send its Oruc Reis seismic vessel to Somalia in early October to acquire 3D seismic data on surface oil and gas. The blocks have not been identified (it is best not to publish where the treasures are “kept”), but Bayraktar claims that each one covers about 5,000 square kilometers, with two located 50 kilometers from the coast and the other 100 kilometers from the coast. the coast. He also revealed that the water depths can reach 3,000 meters, adding that the drilling depths below the seabed for future exploration wells are expected to be between 3,000 and 4,000 meters.
Despite all this anticipation and enthusiasm generated, S&P Global explains that operating in the region can be a challenge. Somalia continues to be an unstable country, having experienced a drought between 2021 and 2023 that left half of the population suffering from nutritional deficiencies. In this climate of poverty and uncertainty, tribes, clans and religious groups are gaining strength and are testing the Somali government. Although the federal government has so far managed to “put out these fires,” the inherent weakness of this institution presents a notable risk that jeopardizes foreign business investment.
For example, in the breakaway region of Somaliland (northern Somalia), London-listed Genel Energy has drawn the ire of the Somali federal government by acquiring several blocks negotiated with the local government (rather than the federal government) that could contain 5 billion barrels of oil. Somaliland declared independence from Somalia in 1991, but its bid to gain international recognition has stalled. The breakaway state sees deals with international companies as key to its independence mission.
After Genel announced it had completed a geotechnical survey in Somaliland in December, Mogadishu said it “categorically rejects Genel Energy’s claims to oil rights in the northern regions of Somalia,” and called on the British company to “cease its illegal claims,” prompting a response from the local Somaliland administration, sparking a new conflict between the two sides. Africa is a land full of opportunities and wealth, the big challenge is how to take advantage of it without ending up falling victim to conflict and legal instability.
