| The Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia |
New chapter in country’s development with passing of Petroleum Law
|20 May 2019 Mogadishu, Somalia. The Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia announces that the Petroleum Law of Somalia has now completed its passage through the Parliament of the Federal Republic of Somalia. This is a landmark in the development of Somalia’s natural resources, which will be transformational for the country’s development. |
The Law ensures that any oil discovered is the sole property of the Somali people. That if exploration successfully discovers oil, the revenues from any discovery will enrich generations of the Somali people. The Petroleum Law will enable the long-term development of the country and provide the resource, to establish infrastructure crucial for long-term prosperity.
The Petroleum Law is based on the previous law, passed in 2008, with amendments to update certain provisions including an unprecedented landmark Petroleum Revenue Sharing Agreement on how future revenues from the development of the petroleum industry will be shared between The Federal Government, the country’s six constituent Members States and their local communities. It is for each Member State, through their elected representatives, to decide on how their share of these revenues is to be invested.
Recently completed seismic programmes highlighted similar geological structures to those with proven oil & gas reserves in neighbouring basins located in Seychelles, Madagascar, Kenya, Tanzania and Mozambique indicating that Somalia could become one of the most significant oil plays in offshore East Africa. The process for a licensing round in respect of up to 15 blocks covering a total area of approximately 75,000 square km was launched on 7th February 2019 with a potential bid date scheduled for 7th November 2019. No blocks in the area currently under dispute with Kenya will be part of this or future licensing rounds until settlement is reached. The Petroleum Law also establishes a Petroleum Registry for legacy right holders. It also updates the Production Sharing Agreements (“PSAs”) setting the key requirements for environmental protection and attractive fiscal terms in the event of any discoveries and subsequent development. With the passage of the Petroleum Law, it is anticipated that PSAs will subsequently be signed, which will enable exploration activity to then commence and hopefully lead to discoveries. The first stage will be planning and mobilising for more seismic data and the drilling of exploration wells over 2020 and 2021.
Commenting on the passage of the Petroleum Law His Excellency Abdirashid Mohamed Ahmed, The Minister of Petroleum & Mineral Resources, said: “The passage of the Petroleum Law heralds a new chapter in our country’s development. My ministry has worked successfully with the federal member states to develop an equitable and transparent framework for the development of natural resources for the greater good of Somalia and all its people. We are at the beginning of a journey that will be key to Somalia’s sustainable development and poverty reduction, as well as the continued development of stable state and civil institutions. The Petroleum Law enshrines the principle of accountability by the Government to all citizens for the stewardship of revenue streams and public expenditure. At all times our priority will be to ensure that we protect the precious environment of which we are the custodians and ensure the industry operates to the highest standards of health and safety.”
Mariam Hussein Mohammed, Senior Legal Counsel with the African Legal Support Facility (ALSF), an international institution of the African Development Bank said: “The passing of the Petroleum Law is a critical stage in the development of Somalia’s resources industry, which will be an important engine for economic growth over the longer term. We support the Government’s approach which is focused on sustainable development across all the Member States and poverty reduction. The development of the industry can now proceed which will create an enhanced environment for domestic and foreign direct investment. The Petroleum Law and Revenue Sharing Agreement are designed to ensure proper transparency by the Government and companies investing in the industry through robust public financial management and accountability.”
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| The Petroleum Act sets out its purpose as follows: |
1. To confirm the sovereign rights of Somalia to explore, develop, produce, utilise and manage its Petroleum resources, located onshore and offshore;
2. To allow efforts to be undertaken to determine the extent of the Petroleum resources which may exist in Somalia, by creating a regulatory, contractual and financial regime that allows the reconnaissance and exploration of hydrocarbons, and development, production and marketing of any resources which are discovered;
3. if Petroleum resources are discovered in Somalia, to provide maximum benefit to Somalia and its people from the development and production of such resources;
4. To ensure the protection, conservation and preservation of the environment in the conduct of Petroleum Operations;
5. To encourage and support foreign investment which occurs to attain the other purposes of this Law;
6. To establish the Somalia Petroleum Authority as the competent regulatory authority to regulate Petroleum Operations, applying regulatory principles of equality, openness, accountability, transparency and non-discrimination;
7. To establish Somali National Oil Company (SONOC) as an entity Controlled by the Government for the participation in Petroleum Operations in Somalia;
8.To comply with international initiatives to ensure transparency of extractive industries, by enhancing public financial management and accountability, recognising that management of natural resource wealth for the benefit of Somali citizens is in the domain of the Government, to be exercised in the interests of national development; and
9.To ensure fair treatment of specified persons holding rights pursuant to Petroleum grants made by the Somali Democratic Republic on or before December 30, 1990, and agreements made by the Federal Government of Somalia