Challenges of having an oil exploration license in Somalia

DNO of Norway currently holds a production sharing contract in Block SL-18 following the signing of an agreement with the republic of Somaliland in April last year. In a country that has autonomous regions the same block is however being contested by 3 ‘states’ including Somaliland, Somalia and Khatumo.

DNO controls 100 percent paying interest in the license in the block that covers 1200km2 and is currently in the exploration stage while the Somaliland government holds 10 percent in carried interest.

The challenge in this block is that it falls within Hudun district in Sool province and has been the center of conflict between the state of Khaatumo and Somaliland with the latter having attempted to capture Hudun town several times this year.

Apart from Sool Block SL 18 can be located to the Nugaal valley basin (that also has two other provinces Sanaag and Ayn) as is thought to be in preparation for Seismic surveys and overall drilling thereafter with Khaatumo blaming DNO for sponsoring Somaliland forces.

It is however not just DNo finding itself at this crossroads as horn Petroleum, ConnocoPhilips and Shell also have oil exploration license some as old as the Mohamed Siad Barre led government that collapsed in 1991.

For such companies they are unsure what way to proceed as some of these states are yet to be recognized by even the United Nations hence it is unclear as to how much weight such documentation have.

Worst still as resources continue to be the center of conflict these companies will be at pains to separate themselves from the conflict as has been the case in other countries in Africa.

In a report last year the UN monitoring group to the Security Council warned that the oil deals being entered by various autonomous states could be a source of conflict in the region.

“Potentially, it means that exploration operations in these blocks, conducted by both DNO and Africa Oil under the protection of regional security forces, its allied militia or private forces,could generate new conflict between Somaliland and Puntland,” the report said.

Just recently oilnewskenya published a statement from Khaatumo state warning companies exploring oil in the region without licenses of prosecution.

Worse still there are no clear borders and demarcations in these areas that clearly stipulate the territories of various states in various areas.