Uncertainty over legitimacy of PSC’s in Somalia keeps explorers at bay

Over the past few months a number of explorers searching for oil and gas in Puntland and Somaliland have closed shop as border wrangles between the autonomous states Somalia continue.

More recently to stop exploration activity was Horn Petroleum which said it was unable to continue with its search in the Dharoor and Nugaal blocks which overlap the contentious border.

Earlier its partner and operator in the blocks Range Resources had also made its decision to close its offices in Somalia until there is a ‘clear and contractual certainty around the Production Sharing Agreements (PSAs) and the legal regime’ that currently exists in Puntland.

In both occasions the explorers have asked for license extensions awaiting an adequate resolution to be reached.

Genel Energy which is the Operator in blocks SL-10B and SL-13 has also suspended seismic acquisition in Somaliland.

Other companies that have either slowed down exploration activity, stopped or suspended operations includes Sterling Resources and Australian explorer Jacka Resources.

Elsewhere onshore Block SL18 Operator Norwegian explorer which has also received a license extension in Somaliland has also had situations where its team has been caught in shootouts in the region.

And whereas oil companies stand to lose their said money invested through delays in projects or through license cancellation there are questions as to whether the hydrocarbon potential in the area could be a source of this dispute all together.

According to a report by the UN Monitoring Group on Somalia and Eritrea some of the oil companies in the region may be fuelling the insecurity in the area with DNO named.

Already the Somali government has warned it may file complaints against this firms to the United Nations Security Council with the Norwegian explorer accused of ‘planning to introduce armed militiamen in areas already in conflict and thereby stoking old feuds which resulted in internal displacement and harming the innocent and the most vulnerable people.’

The United Nations has also warned that oil discoveries in the regions could lead to violence in the largely peaceful two semi-autonomous regions.

These developments could hurt the comeback by oil majors in the horn of Africa most of whom have had dormant contracts since war erupted in the region in 1991 as well as efforts to hasten exploration in the region.

A planned oil protection unit by the Somaliland regime is yet to be put up although pundits also argue that this force could also deepen strains between the wrangling sides.

As it stand exploration activity in contentious region remain paralyzed until and amicable solution is reached.

Onshore Somalia is also having border problems with Kenya over a triangle of water stretching more than 100,000 a sq kilometers and which Kenya has awarded seven licenses to various companies including: Eni, Anadarko and Total.