Somalian President Mohamed Abdullahi Farmajo ratified the country’s first petroleum law in the modern era in Mogadishu on Saturday. The legislative process, having earlier been approved by the upper and lower houses of the federal parliament, is now complete.
“The petroleum law demonstrates the capacity of the Somalian people to unite in an historic effort to work together to build an equitable, prosperous and peaceful nation. In supporting this law, our democratic institutions have renewed their commitment to work for all Somalis and advance the cause of continued reconstruction,” says Farmajo.
The law states that Somalia’s oil and gas belongs exclusively to its people and embeds a revenue-sharing agreement (RSA) that distributes money among its federal states. A solid legal agreement between all stakeholders is an essential step to providing confidence to IOCs ahead of licensing round auctions.
Somalia plans to invest revenue from its offshore discoveries in re-building the country’s economic and social infrastructure, focusing on education, security and healthcare, according to the federal Ministry of Petroleum and Mineral Resources.
The petroleum act also sets the groundwork for creating a regulatory regime, various environmental and transparency measures, encourages foreign investment and establishes the Somalia Petroleum Authority and Somali National Oil Company (Sonoc).
“The opportunities for the international exploration and development majors are enormous, with Somalia having the potential to become one of the most significant hydrocarbon plays in offshore East Africa,” says Abdirashid Mohamed Ahmed, minister of petroleum and mineral resources.
Ahmed told Petroleum Economist that the country has made substantial progress in establishing security during the recovery from its long civil war period of lawlessness and piracy.
“The legislative process was completed to open up this strategic opportunity,” says Ahmed. “We now much look forward to moving to agreeing production sharing agreements with our international partners.” petroleum-economist