Published On: Tue, Dec 4th, 2012

Energy Juniors Eye Somaliland Oil Potential

Three foreign oil juniors are set to begin exploration in Somaliland by next year, as the rush on East African hydrocarbon largesse extends to the riskiest venues of the Horn.

There’s one small problem, though: Somaliland has not been recognized since it declared independence from Somalia in 1991.

That, however, is a minor detail as far as Turkey’s Genel Energy, Australia’s Jacka Resources, and the UK’s Ophir Energy are concerned. All three have announced they will launch exploration in early 2013.

Somaliland officials are of course euphoric.

The big name here is Genel Energy Plc (GENL), headed by former BP CEO Tony Hayward. The Turkish company hopes to drill its first well in Somaliland in 2014.

Genel said it would buy a 50% interest in the Odewayne block in Somaliland from Jacka Resources Ltd. (JKA) for $657,000. Genel will operate the block and assume the costs of seismic work and drilling an exploration well.

It’s the geology that’s got everyone excited, drawing comparisons to Yemen, which has some 9 billion barrels of proven reserves—and enough conflict to make extraction, production and getting product to market a major challenge.

Genel is sure the resources are there, leaving only commercial viability to determine.

Everyone might have been a bit surprised at Genel’s interest in Somaliland. The Turkish company has never previously shown any interest in Africa. Now it is ready to dump $40 million in investment into Somaliland next year alone. Over the next three years, Genel reportedly plans to invest around $400 million in Africa.

In August, Genel acquired rights to two blocks in Somaliland, and made similar acquisition elsewhere in Africa—in Morocco and Côte d’Ivoire.

Somaliland is now courting more investors for the rest of its onshore and offshore blocks.

Investing in an unrecognized country is a bit challenging, however. Insurance is a major question, and international financial institutions—necessary for economic development—can’t touch a nation that has no sovereignty.

Sovereignty aside, the rest of the package is fairly attractive. There is relative stability and Somaliland’s Berbera port—located along a fairly busy maritime lane–makes it a potential strategic hub between Africa and the Middle East. Somaliland officials are already eyeing the potential for refineries and export terminals.

War-torn Somalia and semi-autonomous Puntland—Somaliland’s neighbors—are also benefitting the rush of interest from foreign oil companies. Canada’s Africa Oil began drilling wells in Somalia in January. This is the first oil activity Somalia has seen in over two decades.

Some of the security optimism stems from a largely US and Kenyan offensive against al-Shabaab militants in Somalia, which has wrong-footed the militant group and put them on the run. Everyone seems to feel there is some breathing room in Somalia now, but this should not be translated into stability. Al-Shabaab may be down, but it’s not out, and there is evidence that it is regrouping in Puntland, which will be bad news for Somalia and its neighbors.

By. Jen Alic of Oilprice.com

  • PuntlandGeezer(PIS)

    I greatly hope oil is found in the north of somalia.

    • Buuxiye

      Let us see if you are still smiling come 9th Jan 2013!!!

      • PuntlandGeezer(PIS)

        let's cut the chase regardless whatever happens in january 9th won't have any affect on me. I live in hargeisa now my country aka somalia and there's nothing you or the Ethiopian stooge (SNM) can do.

        • Kasye the 2nd.

          Do not lie, you live in refugee camp Dadab, of Kenya. The headquarter of Pirateland.

          • Buuxiye

            12 Majeertos lie face in the sand in Galgala, Fuad Shangole is Home in Bari to prepare for 09 Jan 2013.

            Viva Mujahidiinta over piratelan :)

    • jaarso

      kkkkkkkkk daroods will not taste a single drop of this, they didn't share their pirate revenues

  • ismail mohammed

    it will help due scarcity of jobless in somaliland and will improve our living standards accordingly . viva silanyo viva somaliland

  • caynab

    All Somalilanders be careful to keep taking to this ugly and hatred ppl. Please don't give them attention. They already closed all of their websites and they were fadhi kudiriir more than 20 yrs(?). As you know they lost all human entity and the word "Somali" is …? you name it …therefore please keep your healthy discussion which we build our country.. and avoid their virus. in fact after 20 yrs, there is no anti virus software for them (Somali).

  • isaaqunionist

    To these investers, This is a way to do business with the WHOLE of what is Somalia according to IC, regardless of politics of it (Somaliland, Puntland, Galmudug, and etc.). We need to take this opportunity to unite, build our economy, and think ahead these investors. Otherwise, we may be end up like Nigeria! I hope all Somalis will benefit from this oil drilling cuz WE GOT A LOT! We can be like Dubai if we get our act and make the right decisions :)

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