Coastline Exploration bets on oil and gas in Somalia

Somalia, one of the last remaining untapped territories for oil and gas, is attracting a new interest in exploration. Despite years of conflict and instability, international companies are embarking on this risky venture, attracted by the potential reserves of several billion barrels.

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International oil companies such as Chevron, Eni, ExxonMobil and Shell began exploring Somalia in the 1950s, but left the country when civil war broke out in 1991. Today, Houston-based Coastline Exploration is leading a new offensive, having acquired seven offshore blocks from the Somali federal government in 2022.

The U.S. company is considering partnership proposals for its explorations in the country, but CEO Richard Anderson told S&P Global Commodity Insights that it is not dependent on future partners. ExxonMobil and Shell are also reportedly considering a return to Somalia, a country located on a vital international shipping route.

Huge potential

In March 2020, the Ministry of Oil established an initial roadmap with the two companies. According to 2-D seismic surveys conducted by TGS in 2014, Somalia may initially possess 30 billion barrels of oil spread across 15 blocks proposed by the government.

The Russian invasion of Ukraine has sparked discussions about energy security in Africa, where access to electricity is low. In addition, major oil and gas discoveries in Mozambique, Tanzania and Uganda have whetted investor appetite for East African hydrocarbons. However, analysts believe that the emerging oil sector and new ports could be targets for Al Shabab militants, who control large areas.

Coastline announced in February that it had signed production sharing agreements for seven blocks covering 35,000 square kilometers, nearly two years after the launch of Somalia’s first offshore bidding round. Anderson said Coastline’s projects will progress in November.

Secessionist region

However, operating in the area can be difficult. In the breakaway northern region of Somaliland, the London-listed British company Genel Energy has incurred the wrath of Somalia’s federal government by acquiring blocks from the local government that could hold 5 billion barrels of oil. Somaliland declared its independence from Somalia in 1991, but its application for international recognition has been blocked.

The secessionist state sees agreements with international companies as essential to its mission of independence. Following Genel’s announcement that it had completed a geotechnical study in Somaliland in December, Mogadishu said it “categorically rejects Genel Energy plc’s claim to oil rights in the northern regions of Somalia” and demanded that the British company “cease its illegal claim”, prompting a furious response from the Somaliland administration. According to Genel, drilling should begin in Somaliland in late 2023 or early 2024.

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