Continental Focus, International Reach

Somalia Passes Petroleum Law

Tuesday, May 21, 2019

The Ministry of Petroleum and Mineral Resources of Somalia announced that the Petroleum Law of Somalia has now completed its passage through the parliament. The law just passed by the parliament ensures that any oil discovered is the sole property of the Somali people and that the revenues from any discovery be used to enrich generations of Somali people. The Petroleum Law will enable the long-term development of the country and provide the resources, to establish infrastructure crucial for long-term prosperity.

The Petroleum Law is based on the previous law, passed in 2008, with amendments to update certain provisions including an unprecedented landmark Petroleum Revenue Sharing Agreement on how future revenues from the development of the petroleum industry will be shared between The Federal Government, the country’s six constituent Members States and their local communities. It is for each Member State, through their elected representatives, to decide on how their share of these revenues is to be invested.

The process for a licensing round in respect of up to 15 blocks covering a total area of approximately 75,000 sq km was launched on February 7, with a potential bid date scheduled for November 7.  No blocks in the area currently under dispute with Kenya will be part of this or future licensing rounds until settlement is reached.

The Petroleum Law also establishes a Petroleum Registry for legacy right holders. Further, it updates the PSAs setting the key requirements for environmental protection and attractive fiscal terms in the event of any discoveries and subsequent development.

With the passage of the Petroleum Law, it is anticipated that PSAs will subsequently be signed, which will enable exploration activity to then commence and hopefully lead to discoveries. The first stage will be planning and mobilizing for more seismic data and the drilling of exploration wells over 2020 and 2021.

Commenting on the passage of the Petroleum Law Abdirashid Mohamed Ahmed, The Minister of Petroleum & Mineral Resources, said: “The passage of the Petroleum Law heralds a new chapter in our country’s development. My ministry has worked successfully with the federal member states to develop an equitable and transparent framework for the development of natural resources for the greater good of Somalia and all its people.

“We are at the beginning of a journey that will be key to Somalia’s sustainable development and poverty reduction, as well as the continued development of stable state and civil institutions. The Petroleum Law enshrines the principle of accountability by the Government to all citizens for the stewardship of revenue streams and public expenditure. At all times our priority will be to ensure that we protect the precious environment of which we are the custodians and ensure the industry operates to the highest standards of health and safety.”

Mariam Hussein Mohammed, Senior Legal Counsel with the African Legal Support Facility (ALSF), an international institution of the African Development Bank said: “The passing of the Petroleum Law is a critical stage in the development of Somalia’s resources industry, which will be an important engine for economic growth over the longer term. We support the Government’s approach which is focused on sustainable development across all the Member States and poverty reduction. The development of the industry can now proceed which will create an enhanced environment for domestic and foreign direct investment.  The Petroleum Law and Revenue Sharing Agreement are designed to ensure proper transparency by the Government and companies investing in the industry through robust public financial management and accountability.”