Oil discovered in Somaliland

Centre Director Amit Jain in Hargeisa, Somaliand

The self-proclaimed state of Somaliland this month announced its first oil discovery. The find is situated within the Odewayne oil block, where London-listed energy company Genel Energy holds an exploration licence. The Ministry of Energy and Minerals of Somaliland confirmed the discovery soon after black liquid started to spill out from a well drilling site in the area. This news immediately drew criticism from Mogadishu, which still officially claims sovereignty over the breakaway region. While the discovery of oil has been greeted with enthusiasm in Somaliland there are concerns that this could draw the unrecognised nascent state into a potential conflict with its beleaguered neighbour in the future. The government of Somalia has warned  Genel to desist from exploring in Somaliland, arguing that such activities were illegal and undermine its sovereignty.   

Hargeisa awarded Genel exploration licence for two onshore blocks in 2012.  They are collectively referred to as SL10B13. A few months later, it expanded its presence in Somaliland by acquiring a 50% stake in the Odewayne Production Sharing Agreement, which encompasses an additional three blocks. The Odewayne block is co-owned by Afentra and Petrosoma.

CPC Corporation of Taiwan, which holds a stake in an adjacent oil block signed an agreement with Genel in December 2021, acquiring a 49% stake in the SL10B13 block. Both parties have embarked on joint oil and gas exploration. Under the terms of the agreement, CPC will begin drilling a well in 2023 and utilise the port of Berbera, located 150 km from the site, to ship crude oil.

Somaliland broke away from Somalia in 1991 and has no formal diplomatic relations with any nation. But it maintains robust informal ties with Taipei. Taiwan opened its de facto embassy in the Somaliland capital of Hargeisa in 2020 the same year Somaliland opened a representative office in Taipei. It is expected the finding of oil will bring Taiwan and Somaliland closer to each other. Besides energy there is growing cooperation between the two diplomatically isolated partners in agriculture, fisheries, and education.  

Despite limited exploration activities so far, Somaliland is believed to hold significant onshore oil potential. Seismic studies project that the SL10B13 block alone has over 5bn barrels of oil. Somaliland's lack of international recognition as an independent country has hindered foreign business interest but has not entirely been ignored. In 2021, Dubai-based logistics company DP World officially opened a new container terminal at Berbera Port, which is considered a geostrategic location on the Gulf of Aden. The terminal has a capacity of 500,000 20-foot containers per year and will be further expanded in the second phase to accommodate 2 million containers. Additionally, the new Berbera Economic Zone is under development and will be linked to the port and a road corridor connecting the city with Ethiopia. Singapore-based commodities trader Trafigura Group has also committed to improving and expanding the storage capacity of the Berbera Oil Terminal to facilitate the import of jet fuel and liquefied petroleum gas for the local and regional markets.

 

References

‘Interim Management Statement’, Genel Energy, 30 October 2013

‘Trading and operations update’, Genel Energy, 20 January 2016

‘Audited results for the year ended 31 December 2017’, Genel Energy, 22 March 2018

‘Trading and operations update’, Genel Energy, 01 November 2019

‘Trafigura to invest in improving Berbera Oil Terminal to become a regional supply hub with the support of the Government of Somaliland’, Trafigura, 07 September 2020

‘Trafigura’s investment fuels optimism in Somaliland’, African Business, 05 November 2020

‘DP World and Somaliland open new terminal at Berbera Port, announce second phase expansion and break ground for economic zone’, DP World, 24 June 2021

‘Somaliland farm-out’, Genel Energy, 20 December 2021

‘CPC Corporation obtains 49% working interest in mining areas of Somaliland’, CPC Corporation, 30 March 2022

‘Somaliland pitches 'huge' oil and gas potential during Taiwan trip – FX Empire’, SomalilandPost, 20 April 2022

‘Has Somaliland struck it rich in new surface oil discovery?’, SomTribune, 30 September 2022

‘Somaliland announces first oil discovery’, BBC, 09 January 2023

‘Trading and operations update’, Genel Energy, 17 January 2023

‘Somaliland’, Genel Energy, Accessed 19 January 2023