Somaliland to Sign Accord With Fourth Company on Oil Exploration

By Benjamin Harvey

Somaliland expects to sign an agreement with a fourth international energy company this week to begin exploring for oil in the semi-autonomous region, Energy Minister Hussein Abdi Dualeh said.

An accord with the Middle East-based company, which Dualeh declined to identify, has been completed, he said in a phone interview on Nov. 21 from Somaliland. The other three companies already operating in the country are London-based Genel Energy Plc (GENL), RAK Gas LLC, owned by the government of Ras al-Khaimah in the United Arab Emirates, and Oslo-based DNO International ASA. (DNO)

“All talks are concluded” with the fourth company, Dualeh said. “It’s just a matter of inking the deal, which hopefully is going to be this month.”

Somaliland, situated on the tip of the Horn of Africa, declared independence from Somalia in 1991, though no country has officially recognized it as a sovereign state. Somaliland and the neighboring region of Puntland are part of a southward extension of the “lucrative geologic framework of the Arabian Gulf” that includes Saudi Arabia, according to Osman Salad Hersi, an associate geology professor at the University of Regina in Canada. Saudi Arabia is the world’s biggest oil producer.

Previous attempts to encourage exploration in the region foundered because of perceptions among investors that Somaliland has the same security concerns as neighboring Somalia, where Islamist militants have been seeking to establish an Islamic state since at least 2006.

‘Deteriorating Security’

Last week, Genel Chief Executive Officer Tony Hayward, the former CEO of BP Plc, announced the company was resuming operations two months after suspending exploration work in September because of a “deteriorating security situation.” Somaliland’s government has done a “full-blown security assessment” to assess the threat, Dualeh said.

The U.K. Foreign Office advises against all travel in Somaliland because of the “high threat” that westerners face from terrorism and kidnapping, according to its website. The U.S. State Department warns its citizens to obtain kidnap and recovery insurance when traveling in the region.

“There are no real threats, but nevertheless we decided to make sure that we apply any security level that international companies need to operate in Somaliland,” Dualeh said. “We provide full protection for the operation, not only for Genel but for other operating companies here.”

Genel, the biggest oil producer in the Kurdistan region of northern Iraq, is expected to need at least two months to put its logistics back in place before resuming exploration work next year, Dualeh said.

Seismic work by the four companies is expected to be completed by the end of 2014, before drilling commences in 2015, Dualeh said.

Genel is “very bullish” about finding oil in Somaliland, he said. “There’s a parallel between their successes in Kurdistan and successes we hope to have here in Somaliland.”

To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

Source: bloomberg.com