Soma Oil & Gas, a UK-based company established to survey and explore oil and gas potential in Somalia, is the first to sign an oil deal with the new Somali government. The East African country has suffered from years of political unrest and violence since a civil war broke out in 1991, but saw the formation of an internationally recognised government with the inauguration of President Hassan Sheikh Mohamud in September last year.[hidepost=9][/hidepost]
Soma, which was only established this year, is headed by chairman Michael Howard, a former Conservative Party leader who has held various cabinet positions in British government, and CEO Robert Sheppard, an ex-BP executive with over 40 years’ experience in the energy sector.
According to Sheppard, Somalia’s oil and gas potential is relatively under-explored, and with recent discoveries in East African countries such as Tanzania and Kenya, Soma is reportedly investing over US$20m in exploring Somalia’s oil and gas potential. In addition, Sheppard told How we made it in Africa that the company believes Somalia is beginning to move in a positive direction under its new central government.
“There are green shoots of economic development, there are green shoots of stability, and we combine that with the exploration prospectively and for a first-mover… to fill that space very quickly I think is to Soma’s advantage.”
Despite this optimism, Somalia is still affected by conflict. Aid agency Médecins Sans Frontières (Doctors Without Borders) recently announced it would be pulling out of Somalia. According to Unni Karunakara, the agency’s international president, the organisation could no longer put up with the attacks it was experiencing such as looting, kidnapping and murder.
Sheppard said the global oil and gas exploration industry has a high risk profile, and the additional risks that come with working in a country with a history of conflict are diminishing in Somalia.
“They have a central government that is working very hard to stabilise the country. There is a lot of international support for that stabilisation. So we think those risks are being diminished.”
He added that Soma’s activities will be primarily devoted to offshore surveying and exploration. “That gives us more control over the environment and then diminishes the risk in that sense.”
According to Soma, the agreement with the Somali government will allow the company to conduct seismic surveying in specific areas in Somalia’s territorial waters and in limited onshore areas. In addition, the company will also collect and reprocess historic seismic data and provide the government with an evaluation of the country’s petroleum potential.
“We have agreed to collate and collect the existing geologic and geophysical data that may be out there, because much of that data was lost as a result of the conflict,” said Sheppard. “We are trying to reconstruct that information from other sources and put it in a modern digital format and give that to the government.”
In return, Soma will be able to get an application to nominate and obtain exploration and drilling rights for reportedly up to 12 oil blocks.
“That agreement is a bit unique and in consideration of that we have been given the opportunity to get an application for some production sharing agreement areas, under the petroleum law of 2008… where we can take the exploration activity to the next phase,” said Sheppard.
Prior to the civil war, a number of major oil companies including Shell and Total had claimed and signed deals for oil blocks, and according to statements by Soma, the company will not impinge on these areas.
Concerns have been raised over Soma being picked for such a deal over more experienced oil players. The East African Energy Forum, a lobby group which seemingly aims to protect the natural resources and sovereignty of Somalia, has accused Soma’s deal of not being transparent. In addition, it has questioned Soma’s capacity and capability, considering that the company is only a few months old.
“I’m not sure what their concerns are,” Sheppard responded. “The transparency issues are pretty clear. We’ve got an open arrangement.”
While Sheppard admitted that he cannot comment on the business potential in other sectors, he said the country is beginning to rebuild itself and there is the opportunity to benefit from being a first-mover in the country. He said foreign businesses should contact the appropriate ministry in Somalia when looking to enter the country, and engage with government in a straightforward manner.
“[The Somali government] is new, I will grant you that, but I think there is help from international agencies and others that have tried to put together a government system that is quite similar in nature to other countries,” he said.