New chapter in Somalia’s oil and gas sector with passing of Petroleum Law

Somalia’s Ministry of Petroleum and Mineral Resources reports that the Petroleum Law of Somalia has completed its passage through the Parliament of the Federal Republic of Somalia. The Law ensures that any oil discovered is the sole property of the Somali people and aims to ensure the long-term development of the country and provide the resources to establish infrastructure crucial for long-term prosperity. 

The Petroleum Law includes what is being hailed a landmark petroleum revenue sharing agreement on how future revenues from the development of the petroleum industry will be shared between the federal government, the country’s six constituent member states and their local communities. It will be for each member state, through their elected representatives, to decide on how their share of these revenues is to be invested.

Recently completed seismic programmes have highlighted similar geological structures to those with proven oil and gas reserves in neighbouring basins located in the Seychelles, Madagascar, Kenya, Tanzania and Mozambique, indicating that Somalia could become a significant oil play in offshore East Africa. The process for a licensing round covering up to 15 blocks was launched on 7 February 2019, with a potential bid date scheduled for 7 November 2019. No blocks in the area currently under dispute with Kenya will be part of this or future licensing rounds until settlement is reached, notes the Ministry.

The Petroleum Law also establishes a Petroleum Registry for legacy right holders and updates the production sharing agreements (PSAs) setting the key requirements for environmental protection and attractive fiscal terms in the event of any discoveries and subsequent development.