THE FEDERAL GOVERNMENT OF THE REPUBLIC OF SOMALIA
INTERNATIONAL LICENSING ROUND 2020
Tender Protocol Released: 24th November 2020
Somalia Petroleum Authority
1.1 Overview of the developments in the petroleum sector in the last 30 years
1.1.1 Offshore Somalia remains one of the last truly frontier oil & gas basins in the world, with only two exploration wells drilled offshore along the 1,000 km-long margin, despite geological studies indicating that there could be substantial reserves of oil or gas that could transform the country and economy.
1.1.2 In the 1980's, the then government of Somalia signed a number of oil and gas licenses for offshore petroleum blocks, giving oil companies the right to undertake exploration and subsequently production activities. These companies included a number of major international oil companies (IOCs).
1.1.3 In 2012, the FGS was established and as part of the attempts to normalise the business environment, the FGS with the assistance of international development partners started a process to revive the petroleum sector.
1.1.4 From 2014 to 2017, the African Legal Support Facility led a project to support the FGS in reviewing its regulatory framework and to draft a production sharing agreement (Production Sharing Agreement) that represented international best practice and that could be used for future oil and gas transactions with IOCs. The Production Sharing Agreement has now gone through multiple reviews by various international development agencies, and a final Production Sharing Agreement 2020 version has been prepared for this Licensing Round.
1.1.5 In addition to preparing a new market standard Production Sharing Agreement, other development partners assisted with the brokering of a revenue sharing agreement between the member states in Somalia, which was considered to be a critical instrument in ensuring that revenues from regional petroleum operations will be distributed. In addition to the revenue sharing agreement, the FGS has also been working on a new Petroleum Law that provides a stable, long term legal and regulatory framework that promotes cooperation between IOCs and consortiums in a way that protects the investments of the exploration companies participating as well as the rights of the FGS.
1.1.6 The revenue sharing agreement has now been ratified and the new Petroleum Law became effective in February 2020. The new Petroleum Law also established the Somalia Petroleum Authority (SPA), which is now the responsible authority for regulating petroleum operations in Somalia. The purpose of the SPA is to:
(a) regulate the conduct of petroleum operations through the issuance, monitoring and enforcement of 'Authorisations' granted under the Petroleum Law;
(b) ensure that any entity granted an Authorisation is commercially, technically and financially competent;
(c) to ensure compliance of the Petroleum Law; and
(d) report to the Ministry.
1.1.7 Now that Somalia has an established petroleum authority, new Production Sharing Agreement and new Petroleum Act, the legal and regulatory framework is now in place that will allow IOCs to undertake significant investments in the petroleum sector.