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Energy Juniors Eye Somaliland Oil Potential

By Jen Alic | Mon, 03 December 2012 22:50 | 4

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.

Related Article: The Huge Risk-Reward Scenario In East Africa

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.

Related Article: Why Liberia Has Not Been Able to Break its Resource Curse

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

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Jen Alic
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  • Abdi on March 28 2013 said:
    Its good that Gene l is taking this risk. But iam wondering if Genel did put into consideration to the clan and demographic dynamics before signing up for this concessions. Romours has it that the sub clans that settles on this blocks are rising concerns claiming that they need to know how they are going to be environmentally and economically impacted. I would advice for Genel not to wholly trust those of the Unrecognized Somaliland administration but instead push for the Indigenous settlers of this lands to be involved . If that doesn't happen I fear that they will be a target just as happened in Ethiopia in 2007 where dozen Chinese workers were killed. The administration officials are corrupt , nepotistic and would n try to show that they are the once in control but in reality that is far from the truth. In those areas lives Nomads who are armed and ready to fight back.
  • Mohamed on April 03 2013 said:
    I very much welcome the Turkish as well as others for the daring decisions to invest in Somaliland. I am sure they will not regret it but instead prosper from this venture.The somaliland people (urban or rural )& the country will also benefit be it economical or political gains as i beleive it will pave the way for the long awaited recognition of Somaliland. Indeed the region & the whole world will also benefit as they will welcome a fully democratic & peaceful nation to the United nations.
  • Jama on October 10 2013 said:
    Well done!
    It is a great opportunity to both the people of Somaliland and its neighbors as well as the Gene.
    With all due respect, the most ridiculous comments that I’ve ever read is from Abdi. His reasoning are nothing else but very poor and clan based believes. He can't tell the difference between “the country” and his self-interest. He can't tell the difference between any current administration and the country’s long term future. Administration come and go (And will come and go)….but the country stays here long after we all gone…….That shows how very poor and short sighted Abdi and his colleagues are.....

    Of course, Abdi is from the South Somalia and closely related with the former dictator Siad Bare. But would like him to think on the positive side, too…For sure, this is a major benefit to all Somaliland and its neighbors…including Somalia.

    I wish this is the roadmap to a robust future. Aggressive pursuit of economic competitiveness key to our long-term prosperity.

    Thank you,
    Jama
  • Ahmed Dhegaweyne on November 27 2013 said:
    Abdi needs to understand that when the dictator Al-Bashir of The Sudan contracting Southern Sudan's Oil reserves, Southern Sudan rebels didn't disturb the process. Eventually, they increased the heat as the production started. It only hastened political settlement that predisposed the peaceful political solution that led to the independence of Southern Sudan. Unlike that conflict zone, Somaliland is stable and politically standing on firm ground. Political solution that culminates to the formal recognition or negotiated settlement of any sort will take place. The contracted blocks are located in the most stable regions of Somaliland. The maturity of the Somaliland political system is the secret and strategic location of the Red See (Gulf of Aden) and marketability is the icing on the cake.
    It is about time that all regional players support and try to benefit the economical advantage of the Somaliland's oil boom. Pleas think positive and join the effort.

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