Somalia has reached an agreement with a dormant Royal Dutch Shell and ExxonMobil joint venture to settle payments for rental fees for offshore blocks, as the east African nation seeks to promote the development of its resources.
The agreement settles issues relating to surface rental fees of $1.7m from 1990 to 2008 on five offshore blocks under a concession agreement, as Somalia pushes ahead with plans to license more exploration blocks this year.
Abdirashid Mohamed Ahmed, the country’s petroleum minister, is rushing to attract investment to the east African country that has been ravaged by civil war over the past 30 years, with hopes its hydrocarbon resources could help fund the rebuilding of the country.
At the unveiling of the seismic data in London in February, it was announced that 15 blocks covering 75,000 sq km and containing 30bn barrels would be up for auction later this year. Current government plans aim for first oil production around 2027.
Mr Ahmed said the agreement with Shell and ExxonMobil was “a positive step in developing a road map for them to progress their interest in developing our resources”.
The agreement with the two oil majors follows the passage of the petroleum law through parliament in May, which established a regulator and national oil company and details how future oil revenues are to be shared between the federal government, states and local areas. It is due to be passed through the upper house next month.
The ministry is also expected to honour legacy contracts including the one signed in 2014 by Soma Oil and Gas, which was chaired by former Conservative party leader Michael Howard up until June of last year.
However, the country faces challenges in attracting the largest oil and gas companies back to its shores.
Shell, which withdrew with ExxonMobil from the country shortly before the civil war broke out in 1991, said the payment “does not affect force majeure status, which remains in place”, indicating it was not rushing back into the country. ExxonMobil did not immediately respond to a request for comment.
Oil companies have also questioned the ministry about whether legislation will be ready in time, and the terms of the production sharing agreements.
“We are hoping for business. We have three advantages: our geographical location, promising seismic data and attractive legislation,” said Mr Ahmed.
