LONDON (Reuters) – Somalia aims to produce oil within six years, Petroleum Minister Daud Mohamed Omar said on Monday, as he announced plans to reassert control over a sector which has foundered since the outbreak of civil war in 1991.
Hopes that the impoverished East African nation could emulate neighbouring Kenya by discovering and bringing to market offshore resources have been kept on ice by long-running territorial disputes between regional authorities.
The Ministry of Petroleum and Mineral Resources has drafted bills for revenue sharing and downstream development, and submitted them to state governments for approval, Omar said in a statement read by an interpreter at the second annual Somalia Oil and Gas summit in London.
He added that the ministry, created less than a year ago, was the only legitimate authority in the sector and that deals signed with regional governments were illegal.
The federal government is in talks with international oil companies, including Shell, to revive contracts which were put under force majeure in 1991, Omar said.
He said the government would protect the rights of concession holders, but warned companies not to “sit on the nation’s assets” by keeping the force majeure clauses in place.
Force majeure clauses temporarily absolve a company of its contractual obligations due to events beyond its control, including armed conflict.
Omar said that offshore production should begin in six years, and onshore production in nine years.
Alirio Parra, former energy minister of Venezuela who was involved in organising the conference, said Somalia faced many challenges associated with building a sector from the ground up, including developing a workforce, installing infrastructure and accessing finance.
NO TIME TO WASTE
The ministry aims to bring in new investors to achieve these goals, including small oil companies which Omar praised for their flexibility and quick start-up times.
“Somalia does not have time to waste,” he added.
Soma Oil & Gas, a British company working exclusively in Somalia, is conducting offshore seismic exploration which it expects to complete by early 2015.
Chief executive Robert Sheppard said that if the results were promising, the company would begin shooting 3D seismic and drilling exploration wells under a production sharing agreement with the government.
He added that the seismic teams had not suffered any security incidents during several months of offshore activities.
Somalia’s coastline is a hotspot for piracy, though a NATO task force and a growing private security industry have partially offset the risk.
Much will depend on whether the ministry can push through a deal with regional governments to jointly administer the oil sector. Omar said that the ministry was awaiting responses from these governments on the draft revenue sharing bill.
The federal government signed an agreement last week with the state of Puntland to resume relations, a United Nations statement said.
But another break-away territory, Somaliland, remains effectively independent and last month extended an oil deal with Norway’s DNO until late 2017.
The ministry recently criticised companies which had struck deals with regional governments, accusing them of destabilising the country.
“Somalia is a sovereign nation,” Omar said. “The days of impunity are over.”