The Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia has announced an agreement was reached between the country’s member states and is now included in the country’s petroleum law, Kallanish Energy learns.
The bill, dating back to 2008, was reviewed last month based on the Federal System introduced in 2012.
Under the Petroleum Ownership Management and Revenue Sharing Agreement signed by the government and the member states, the country’s mineral resources belong to the Somali people and shall be represented by local authorities.
The agreement provides guidance on how revenue coming from upstream activities will be shared among communities. Member states will choose independently how to invest their revenue share.
Details of the revenue sharing agreement
| Federal government | Oil- producing states | Local area of oil production | Non-oil producing states | |
| Investment fund | To be determined by Minister of Finance | |||
| Offshore | 55% | 25% | 10% | 10% |
| Onshore | 30% | 30% | 20% | 20% |
| Royalty | 40% | 40% | 10% | 10% |
| Signing bonus | 40% | 60% | ||
| Surface rent | 30% | 50% | 20% | |
| License fee | 50% | 50% | ||
| Production bonus | 30% | 50% | 10% | 10% |
| Corporate income tax | 100% | |||
| Export tax | 60% | 40% | ||
| Capital gains | 50% | 30% | 20% | |
| Seismic data | 50% | 50% | ||
| Capacity building | 50% | 50% | ||
| Local community development | 30% | 70% |
(Source: Somali Petroleum and Mineral Resources Ministry)
The goal is to boost the country’s economy by increasing transparency and promoting fair investment.
The country has potential for exploration. Seismic surveys conducted by British companies Soma Oil & Gas and Spectrum Geo revealed it could hold as much as 30 billion barrels of crude oil in a total of 50 blocks covering 66,795 square miles.
Data suggest similar geological structures in basins located in Mozambique, Kenya, Tanzania, Seychelles and Madagascar.
The Ministry in February launched a licensing round for 15 offshore blocks, with the bid date scheduled for November. None of these blocks are within the area disputed with Kenya.
“Our Petroleum Revenue Sharing Agreement is globally unique, delivering by far the highest percentage of potential revenue to non-Federal institutions of any comparable agreement,” said Abdirashid Mohamed Ahmed, minister of Petroleum & Mineral Resources, in a release.
“While it will take many years for production to commence, if commercially recoverable oil reserves are discovered, this agreement has the potential to transform the lives of all the people of Somalia,” he added.
