Pioneering Soma Oil to give Somalia data, pick exploration areas
Wednesday, August 21, 2013
Soma Oil & Gas, one of the first energy explorers in Somalia after years of war, has agreed to give the government data on the country's offshore potential in return for the first choice of unclaimed areas, its chief executive said.
Somalia is emerging from two decades of conflict that left it in ruins. Energy companies are starting to take a cautious interest in a long coastline that stayed undeveloped as other parts of East Africa became exploration hot spots but still presents risks from piracy and political violence.
Last year a new government elected a permanent president and the country wants to attract investment to rebuild.
Soma, a privately-owned company formed this year, said it plans to spend an initial $20 million-plus on gathering old data and digitalising it, and contracting a boat to collect new seismic information on the geology off Somalia's coast.
"In this industry, when you look at where the major underexplored areas are in the world, Somalia kind of sticks out, particularly with the successes we've seen recently in the other parts of East Africa," Chief Executive Robert Sheppard said in an interview.
A wave of oil and gas development has spread up the east coast of Africa in recent years from Mozambique through Tanzania and Kenya and in Uganda, where big finds have been made.
Somalia could join this energy boom, although its parliament has yet to adopt a petroleum law and there may be complications given that some of the world's biggest oil companies have contracts with the country signed before 1991.
Soma said it would take proportionate measures to meet threats from piracy, pointing out that the number of attacks by Somali pirates has fallen in the last two years due to increased naval patrols and the presence of armed security teams on ships.
Soma said its deal, which did not form part of a wider process with multiple bidding parties, was the new government's first such agreement.
The company said it would restrict its interest to areas that were not contested by other companies with historic claims.
There are plenty of unlicensed areas available, Sheppard said, as only parts of the shallow water were linked to other companies under historic deals.
Most of the deep water was available as well as large parts of the waters towards Kenya.
"The nature of this agreement is somewhat unique," said Sheppard, who was a board member of oil major BP's former part-owned Russian arm TNK-BP, now part of Rosneft .
The company will provide the government with exploration data in exchange for having first choice, ahead of other potentially interested parties, over areas where it might want to obtain exploration and drilling rights.
Soma's relationship with Somalia was cemented by a meeting with the president at a donor summit in London in May, Sheppard said. The London-headquartered company is chaired by Michael Howard, the current British Prime Minister's predecessor as Conservative party leader.
"We've had a lot of people express interest in investing in the company so we'll generate some additional funding here over the next few months," he said, adding that more than $20 million should be enough to last the company until late next year.
Businessman Basil Shiblaq has provided founding financing to the company, said Sheppard. Soma said he is also a founding investor in London-listed East African explorer Ophir Energy .
Somalia saw some drilling onshore in the 1960s, but offshore areas have seen little exploration.
Last year, Genel Energy said it had gained a foothold in blocks off the coast of Somaliland, a semi-autonomous part of Somalia, while Red Emperor has undertaken drilling in semi-autonomous Puntland. (Editing by Anthony Barker)