The Federal Republic of Somalia has officially opened the first round of bidding for oil exploration in the country, said to be run under the Somali Petroleum Law as well as petroleum sharing agreements.

Earlier this week, the Ministry of Petroleum and Mineral Resources of Somalia, in a virtual meeting with about 130 investors, briefed the potential investors on the oil capacity of the country. Somalia has about 50 offshore oil blocks running along its coastline of 3,000 kilometres.

The Minister of Petroleum and Mineral Resources, Abdirashid Mohamed Ahmed, said the Licensing Round pre-Agreement Offshore would target the ‘most potential’ seven blocks for hydrocarbons. The blocks are scattered in Galmudug state, Hirshabelle, South West and Jubbaland.

 

In a statement by the Deputy Minister of Petroleum and Mineral Resources, Mohamed Abdikadir Hilaal, “The process will be transparent and take for one year.” He further said, “The pre-announced Licensing Round is the beginning of a tendering process. Somalia will only officially sign an exploration agreement when the Extractive Income Tax Law is enacted.”

 

This has attracted critics to the decision of the federal government. While some argue that there aren’t sufficient laws put in place to manage the programme, others are questioning its timing. It is reported that the bids for the blocks were announced before a revenue-sharing agreement between the federal government and federal states was reached.

 

Speaking to theeastafrican.co.ke, Mr Ilyas Ali Hassan, the Chairman of the Natural Resources Committee of the Somali Senate said, “The oil price is in the lowest ever and the world is fighting for the Coronavirus Pandemic plus Somalia is fighting floods from Qardho, Beledweyne to Bardhere, so they need to know what the priorities for the country are and the rest of the world.

 

“Also, Somalia is approaching the election time and it is a little suspicious to sell the oil blocks.”

 

Another critic of the government’s decision, Mr Mohamed Omar, an analyst on politics in Somali, said, “Somalia must start auctioning those blocks. The world is moving away from oil dependence onto renewable energy and Somalia shouldn’t be left behind…This process has been lagging behind the rest of the world and the chance is now or never.”

 

Oil exploration began in Puntland, north-east Somalia, in the mid-2000s. The country also has untapped reserves of numerous natural resources that the country can diversify to. These include uranium, iron ore, tin, gypsum, bauxite, copper, salt and natural gas.