Somalia, rich in hydrocarbons with a favourable geological structure, has great opportunities for investors looking to enter the East African market, said the country’s Minister of Petroleum and Mineral Resources Abdirashid Mohamed Ahmed at the Africa Oil & Power conference
Somalia has embarked on its path to transform its petroleum industry and attract the attention of new investors. Significant progress has been made in recent years. The passing of the petroleum law earlier this year was a major landmark in enabling the country to make progress in the exploration and development of the resource.
“My ministry has worked hard, and successfully, with members of parliament to develop an equitable and transparent framework for development. This model focusses on the greater good of Somalia and its people, whilst still ensuring that we are attractive and highly competitive internationally to bring the necessary investment, by delivering returns that are consistent with the risks and rewards of developing our offshore industry,” he said.
Ahmed spoke of the central objective of being fully transparent with all its international partners and the Somali people. The revenue sharing agreement defines how future revenues from the development of the hydrocarbon industry will be shared between the federal government, the six constituent member states of the country and their local communities.
The first example of this commitment to transparency and upholding of the revenue sharing agreement is the first, albeit small, receipt of US$1.7mn of rental payments from Exxon and Shell.
Ahmed also spoke of the attractiveness of the country’s production sharing agreement (PSA) model for offshore oil exploration and development, which he described as one of the most attractive for investors in the frontier basins.
The PSA provides a highly attractive regulatory and fiscal framework that is both competitive and equitable for Somali people and international oil companies, he noted.
“The Somali PSA ensures, through equitably linking royalties and share of revenue closely to the price of oil, that international oil companies can recover their up-front development costs and earn a fair share of profit, even if oil prices fall.”
“The PSA is designed to maximise fees and bonuses, giving our state the financial resources needed to rebuild the country sooner rather than later. We believe that this PSA is amongst the most attractive to investors in frontier exploration basins," he concluded.