Exxon, Shell May Return To Explore For Oil In Somalia

Exxon and Shell could return to Somalia ahead of an oil bid round that the East African country plans to hold later in 2019, Reuters reported on Friday, citing a statement from Somalia’s oil ministry.  

Shell and Exxon, which had a joint venture to explore five blocks offshore Somalia, stopped exploration and development in 1990 under force majeure because of the protracted hostilities in the country.

The two oil supermajors have accrued rentals to the government since then, Shell told Reuters in a statement, while the Somali oil ministry said on Friday that an agreement was signed on June 21 in Amsterdam, settling the issues with the rentals and other obligations on offshore blocks accrued.

Exxon and Shell have agreed to hold talks with Somalia’s government to convert their decades-old contracts in line with the new petroleum law that Somalia passed in May.

Yet, despite these developments, the force majeure remains in place, Shell told Reuters.

Last month, Somalia passed its new Petroleum Law, hoping that it is “at the beginning of a journey that will be key to Somalia’s sustainable development and poverty reduction, as well as the continued development of the stable state and civil institutions,” Somalia’s Minister of Petroleum & Mineral Resources, Abdirashid Mohamed Ahmed, said.

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Somalia currently doesn’t produce oil, but hopes that it could hold a lot of oil and gas as “recently completed seismic programs highlighted similar geological structures to those with proven oil & gas reserves in neighboring basins located in Seychelles, Madagascar, Kenya, Tanzania, and Mozambique indicating that Somalia could become one of the most significant oil plays in offshore East Africa,” the oil ministry said in May.

Somalia launched in February a licensing round for 15 blocks, tentatively setting the bid date for November 7, 2019.

The country hopes that seismic surveys and drilling of exploration wells could begin in 2020-2021.  

While drafting the details of an oil bid round, Somalia will also have to attend hearings in September 2019 at the International Court of Justice (ICJ) in The Hague over its maritime dispute with Kenya. In February this year, Kenya broke diplomatic relations with neighbor Somalia after a row over several oil and gas blocks escalated into an open conflict.

By Tsvetana Paraskova for Oilprice.com

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