Somalia Targets Shell, Eni for Oil, Gas Output-Sharing Contracts

Somalia plans to sign 30 oil and gas production-sharing contracts this year, starting with companies that operated in the country before its government was toppled more than two decades ago, an official said.

“All prior holders have been contacted and three are ready to continue,” including Royal Dutch Shell Plc (RDSA), Eni SpA (ENI), and ConocoPhillips (C), Hussein Ali Ahmed, managing director of the state-owned Somalia Petroleum Corp., said in an interview on April 18 in the Kenyan capital, Nairobi. BP Plc (BP/) has indicated an interest in returning, while Chevron Corp. hasn’t formerly answered the Somali government’s call to come back, he said.

Somalia is one of the last frontiers for oil and gas in eastern Africa as it recovers from a two-decade civil war that shattered the economy and left the nation as one of the world’s least developed. In the region, companies including Eni, BG Group Plc (BG/) and Statoil ASA (STL) have discovered more than 100 trillion cubic feet of gas reserves in Mozambique and Tanzania, while London-based Tullow Oil Plc (TLW) has found oil in Uganda and Kenya.

Somali lawmakers in September elected Hassan Sheikh Mohamoud as the country’s president, marking the 16th attempt to establish an effective central government since 1991, when the former dictator Mohamed Siad Barre was overthrown. The country’s security forces, backed by regional peacekeepers, are still battling al-Qaeda-backed Islamic militants who control parts of southern and central Somalia, after fleeing the capital, Mogadishu, in August 2011.

Exploration Blocks

Somalia plans to increase the number of oil and gas exploration blocks to 300 of 5,000 square kilometers (1,931 square miles) each, after sub-dividing the existing 25 areas, according to Ahmed. Some blocks are currently as big as 200,000 square kilometers, Ahmed said.

“We want to sub-divide because they are too big to award to single companies for exploration in good time,” Ahmed said. Shell had five blocks before Barre’s government fell, he said.

The area available to explore for oil and gas in Somalia is equivalent to about one third of the country’s surface, Ahmed said. The country expects to complete legislation under which oil and gas activities will be managed within in months.

“We had drafted a law in 2008, but the new government asked to review it, and we expect they will send in to parliament soon, and the whole process should be complete in a few months,” Ahmed said.

To contact the reporter on this story: David Malingha Doya in Nairobi at dmalingha@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net

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