Somalia ‘open for business’ as U.S. player gets the all-clear for offshore oil & gas exploration

After several agreements between the U.S.-based Coastline Exploration and the Somali Ministry of Petroleum and Minerals for oil and gas exploration off Somalia were deemed null and void by the office of the Auditor General earlier this year, the federal government and the president of the country have thrown their support behind these agreements, allowing the U.S. operator to move forward with its hydrocarbon exploration programme.

Back in February 2022, Coastline Exploration revealed that it had signed seven Production Sharing Agreements (PSAs) covering Somalia’s deepwater blocks, in a bid to proceed with plans to explore the oil and gas potential of the many prospects and leads identified in these offshore blocks. However, after the signing of the deal was confirmed, the opposition came from the office of Prime Minister, Mohamed Hussein Roble, and was followed by a statement from the office of President, Mohamed Abdullahi Farmajo, who declared the deal null and void.

The following day, the office of the Auditor General disclosed that a complaint was filed with the Office of the Attorney General regarding the deal and recommended to the Prime Minister to suspend all individuals involved in the signing until the judiciary fulfils its responsibilities.

In an update on Friday, Coastline Exploration confirmed the final authorisation for it to proceed with its exploration programme was received from the authorities within the Federal Government of Somalia (FGS). Thanks to this, the U.S. firm paid the agreed $7 million signature bonus to the Somali Central Bank in line with the terms of the PSAs.

Hassan Sheikh Mohamud, President of Somalia, remarked: “This agreement highlights that Somalia is open for business and international investment after the conflict that has blighted the country for so many years. I would like to thank Coastline for its commitment to Somalia, as it has fulfilled its promise of investing here, unlike so many other companies.

“Coastline clearly sees significant opportunity in Somalia and we share its vision. The federal government will do all it can to support this project and we want the first exploration well to start as soon as possible.”

Coastline received full government support for its agreements at high-level meetings in Mogadishu with the President; Deputy Prime Minister, Salah Ahmed Jama; Minister of Petroleum and Mineral Resources; Chairman of the Somali Petroleum Authority, Abdulkadir Aden Mohamud; and Attorney General of Somalia, Osman Elmi Guled.

Abdirizak Mohamed, Minister of Petroleum and Mineral Resources, commented: “Having seen how transformational new domestic energy sources have been for other countries in Africa, we are very excited by the potential of these offshore oil fields. Today’s announcement really kickstarts the energy industry in Somalia and is a turning point for the development of what is a critical revenue-generating area for the country.”

Furthermore, the U.S. company explained that the authorisation was granted following the conclusion of an in-depth review conducted by the FGS into the process followed by Coastline and by the relevant Somali Ministries and advisory groups with respect to the signing of the seven PSAs in February.

“Today marks a major step forward for Somalia as we look to develop our energy industry which should deliver material benefits for all Somalis. Energy independence, new tax revenues and further foreign investment in Somalia now beckons,” added Somalia’s president.

Moreover, Coastline hopes to discover multiple offshore oil fields, estimating that approximately 100,000 barrels of oil a day will flow from each discovered field. The U.S. player has invested over $50 million in Somalia, underlining its long-term commitment to developing the country’s offshore energy industry.

W. Richard Anderson, Chief Executive of Coastline, highlighted: “Receiving the clearance authorisation means that we are now able to start our exploration programme. Revenues from the discovery of commercial quantities of oil will be transformative for Somalia from which the government could finance investments in education, infrastructure, healthcare and other vital services, which will benefit all of the people of Somalia, delivering continued economic growth and improving the standard of living.”

When it comes to its PSAs and development plans for Somalia’s energy industry, Coastline has been engaged with multiple stakeholders in the country since 2018. The company expects that its PSAs will enable it to proceed with plans to explore many oil and gas prospects and leads identified in the waters offshore Somalia.

Jacob Ulrich, non-Executive Chairman of Coastline, said: “We are delighted to have been given the go-ahead with the PSAs and we feel confident that we will discover major energy reserves which will have a materially positive impact on all Somalis.

“With the right partners in place and a supportive government, Somalia’s nascent energy industry can look to the future with confidence now that there is a clear road map to potentially securing a sustained domestic oil and gas supply.”

The U.S.-based firm believes there is “ a huge potential for further significant oil and gas discoveries” across offshore East Africa including offshore Somalia.