Parliament Prepping Somaliland for Petroleum Production

Genel is looking for resources of more than two billion barrels of oil in Somaliland, an extremely promising onshore exploration province.

Genel received an exploration license for Somaliland’s onshore blocks SL-10-B and SL-13 in August 2012. In November 2012, Genel expanded its presence by purchasing a 50% participating interest in the Odewayne Production Sharing Agreement, which includes blocks SL-6, SL-7, and SL-10A. Onshore Somaliland is a relatively unexplored region with few drilled exploration wells. The blocks are roughly the same size as the Kurdistan Region of Iraq in total.

Genel announced in December 2021 that it had signed a farm-out agreement with OPIC Somaliland Corporation (‘OSC’) for the SL10B13 block. OSC would receive all of Genel’s future capital investment from Taiwan’s CPC Corporation, a state-owned company. OSC was granted a working interest in the block worth 49 percent under the terms of the agreement in exchange for a cash premium and a cash consideration equal to 49 percent of all Genel’s previous back costs. Genel recently held a 100 percent working revenue, and will go on as administrator.

On the highly prospective SL10B13 block, preparations for the drilling of a well are currently underway. The possibility to be penetrated has been recognized, concurred with our accomplice, and an ideal well area chose to best objective the stacked Mesozoic supply targets with individual planned asset gauges going from 100 to 200 MMbbls.

The geotechnical review has now finished as Genel progress towards development of the well cushion. Tendering for the rig and well services has begun, and assessments of the impact on society and the environment are currently underway.

The planned SL10B13 region is c.150 kilometers from the port at Berbera, offering a course to global business sectors.

Somaliland is a country rich in various natural resources such as oil. In recent times, the government has been making efforts to attract both national and international investors.

The Somaliland parliament’s endeavors to set up the country for oil creation are still in their beginning phases. However, the parliament has made significant progress and is well-positioned to attract investment and develop a sustainable oil and gas.

Among these efforts is the Petroleum Exploration and Production Act which was approved by Parliament last year. This rule applies to oil companies, contractors, subcontractors and their employees. The Act governs both offshore and onshore oil operations, but gives the ministry the authority to make regulations and guidelines specifically for oil operations.

The Somaliland parliament must also take into consideration the potential risks associated with petroleum production, such as corruption and environmental damage. To moderate these risks, the parliament ought lay out a number of safeguards, for example, a requirement for oil companies to publish their financial reports and restriction on oil drilling in sensitive environmental areas.

Given the fact that the parliament is a replica of Somaliland people in general, in addition to the steps listed above, it should also pursue building “public awareness” of the potential benefits and risks of petroleum production. Public workshops, consultations, and information about the petroleum law and the government’s plans for the oil and gas sector must be made public by the parliament.

Somaliland Petroleum Exploration and Production Act

The law mentions different licenses that can be applied for by the companies doing oil operations, such as;

1. Preliminary survey permit

Oil companies that take this license can conduct research and exploration of the country’s oil. After the company’s application, the Ministry of Energy and Minerals will issue a preliminary exploration permit for a period of 90 days. The license is not exclusive to anyone, the Ministry will issue it to anyone who meets the requirements for the license.

When the company receives this license, it does not mean that it has a special privilege that it can later enter into the contract for drilling and oil production. The exploration company must share oil data and information with the Ministry free of charge.

2. Exploration and Production Sharing Agreement.

At the time of the exploration and production sharing agreement, the ministry openly broadcasts the agreement to the national and international media. Stakeholders who applied for the contract will pay a fee or amount of money determined by the ministry. After a period of six months, the Council of Ministers decides the winner, if there is no request, the Minister of Energy and Mines can open negotiations with private companies.

This license or agreement between the Ministry and the oil company consists of two phases; In the first phase, oil exploration, the duration of this agreement cannot exceed 10 years, while the second phase of oil production cannot exceed 30 years. If the license holder wants to renew the first phase of this agreement, he must apply (3) three months before the expiration of his license, while the second phase must apply for his renewal (5) five years before the expiration of the license. The Act states that the Ministry shall issue regulations governing the payments to be made to the applicant.

The law gives the power to approve oil contracts to the Cabinet, while the Ministry of Energy and Minerals can revoke licenses from companies if they violate this law, or if the company goes bankrupt or goes into debt or opens a lawsuit that could lead to bankruptcy.

Rights and Obligations of the Licensee.

The licensee’s rights and obligations are detailed in the agreement between him and the government. However, the Act gives companies general rights and obligations.

  Licensee’s Rights

Obligations of Licensee

1) The company must share with the Ministry within 48 hours the information it receives about the fuel during the execution of fuel operations.

2) The company must protect the data and information of the fuel, it is the duty to provide regular information to the Ministry.

3) The company must protect the safety of the environment and the health of the workers.

4) If the company finds other minerals or other natural resources at the oil field, it must notify the Ministry.

5) The company must pay all taxes.

6) If the company is going to end the oil operations, it must submit the closure plan to the Ministry one year before the expiry of its license.

7) The company, contractor and subcontractor must have insurance.

8) The company can transfer its operations after receiving permission from the Ministry.

9) The company should train its local employees.

10) Gas release permit is approved by the Ministry.

Role of the Ministry of Energy and Minerals.

Apart from the above-mentioned ministerial roles, the Ministry supervises the company’s oil operations by appointing an inspector who has the power to enter the oil field. The law obliges the licensee to facilitate inspection activities and to provide the inspector with the information he requests.

The ministry decides where to bury fuel waste and is responsible for the safety of workers and the fuel site in the event of an emergency.

The Act empowers the Ministry to suspend the license if the company does not carry out oil operations in the proper manner, and it also provides for the punishment of the company that does not have a license to carry out oil operations which is (3) three years of imprisonment or one million US dollars or both, if there is fuel sold or used the company will pay the eligible compensation.

The law punishes those who obstruct oil operations. If the company does not submit the information to the Ministry of Petroleum, it will pay a fine of 50,000 US dollars, while if it does not submit the closure plan, it will be fined 20,000 US dollars

Guest article first published on SII