LNG

The Ministry of Petroleum and Mineral Resources of the Federal Republic of Somalia has launched the former war-torn nation’s first offshore licensing round on a coast where in the territorial waters of countries further south large natural gas finds have been made with LNG export projects planned.

Due to the global travel restrictions caused by of the Cobid-19 pandemic, the Somali Ministry decided to launch the licensing round roadshow virtually.

Somalia is attempting to returning to the international fold after decades of being known mostly for piracy, terrorism and violent militia activity.

The nation was helped in the run-up to the exploration and production licensing offer with a roadmap drawn up by ExxonMobil and Royal Dutch Shell.

The 2020 Somali licensing round features up to seven blocks that are up for the bidding process and are estimated to be among the most prospective areas for hydrocarbons.

An independent partial assessment of the 15 Somali blocks have found there may be a minimum of 30 billion barrels of oil equivalent in shallow and deepwater, which is easily accessible so long as the area remains free of piracy.

Countries south of Somalia on the Indian Ocean Coast such as Tanzania and Mozambique have made substantial offshore resource discoveries, especially of natural gas, with the Mozambicans able to plan world-class LNG projects.

This current licensing round will open on August 4 this year and will be closed March 12, 2021.

Somalia’s virtual launch of the licensing round was seen as a landmark moment in the development of Somalia’s natural resources, which will be transformational for the country’s development.

According to the Ministry, Somalia will be aiming for reliability and transparency for the oil and gas companies willing to be investors and who are prepared to do business with the Somali Government.

“A ground-breaking Petroleum Law completed its legislative process earlier this year,” said a statement.

“The Revenue Sharing Agreement enshrined in The Petroleum Law indicates how future revenues from the development of the industry will be shared between The Federal Government, the Federal Members States and their local communities,” it added.

The Ministry said the agreement has now been “road-tested” with the first revenues, which were recently generated from rental payments from Shell and ExxonMobil.

“The opportunities for the international exploration and development majors are enormous,” said Abdirashid Mohamed Ahmed, the Minister of Petroleum.

“Somalia is committed to attracting investment and promoting partnership and business in all segments of the oil and gas industry value chain,” he added.

Life in Somalia is returning to normal after decades of being a failed state and depicted in films such as “Black Hawk Down”, covering the Battle of Mogadishu in October 1993 between US and United Nations troops and Somali militia.

Piracy off the coast of Somalia was illustrated in another movie based on the true experiences in 2009 of “Captain Phillips”, master of the US-flagged cargo vessel “Maersk Alabama”, which was hijacked.

Somalia itself hopes that sanity has returned to the nation.

The Shell-ExxonMobil oil and gas roadmap will enable the conversion of prior agreed concessions into Production Sharing Agreements under the provisions of the new Somali Petroleum Law.

It builds on an agreement signed in Amsterdam on 21 June 2019 which led to the receipt of US$1.7 million from the Shell-Exxon joint venture from historical surface rentals and other incurred obligations on offshore blocks.

In adherence to the Revenue Sharing Agreement, this payment was re-distributed among Somalia’s Member States for independent allocation.

Analysts said the relationship between the states and the Federal government remains challenging.

Somaliland maintains it is an independent state, while Puntland is part of the federal set-up though with its separate policies.

The analysts have added that there was no doubt that the worst was behind Somalia, with piracy under control for the better part of a decade. Actual and attempted attacks by Somali pirates peaked at 237 incidents in 2011.

The International Chamber of Commerce’s International Maritime Bureau, which specializes in fighting crimes against maritime trading, has reported that piracy fell steeply to just a handful of incidents in each of the last six years.

Ophir Energy, the UK company that lost its Equatorial Guinea licence in West Africa and the potential Fortuna floating liquefied natural gas project, is still holding out hope of securing revenue from its stake in an onshore LNG export project in the East African nation of Tanzania.

Ophir was informed by the Equatorial Guinea Ministry of Mines and Hydrocarbons that the Block R Licence, which contains the Fortuna gas discovery, had expired on 31 December 2018.

The UK company had been unable to meet its schedule for a final investment decision on the Fortuna floating LNG project.

Ophir and OneLNG, a joint venture between Bermuda-based Golar LNG and global energy services company Schlumberger, had established a joint operating company to develop the Fortuna FLNG venture using Golar’s floating hull technology.

“As we announced on 5 January, the Block R licence in Equatorial Guinea has not been extended,” said interim Chief Executive Alan Booth.

“We are in negotiations to rationalise parts of our frontier exploration portfolio with the potential to not only bring in cash, but also importantly reduce our future exploration capital commitments and further improve our liquidity position,” he explained.

“We remain mindful of the potential value of our gas assets in Tanzania, notwithstanding the uncertainty over timing for their development,” stated Booth.

Ophir’s exploration offshore Tanzania and that of other companies has led to discoveries of 15 trillion cubic feet of gross contingent natural gas resources.

The assets have entered the pre-development phase for the Tanzania LNG project.

The UK company and its partners have drilled 16 wells since 2010, including the large Mzia and Jodari discoveries in Block 1.

Of the wells drilled, 11 have been successful exploration wells and five have been appraisals.

Production flow tests have also been completed on Jodari, Mzia, Pweza and Taachui discoveries.

Ophir retains a 20 percent interest in Blocks 1 and 4 and sold 60 percent to BG Group in 2010, now owned by Royal Dutch Shell, and sold a further 20 percent to Pavilion Energy of Singapore in 2014 for US$1.3 billion.

In 2014 the joint venture partners in Blocks 1 and 4 and the partners in Block 2, Equinor of Norway and ExxonMobil, signed an agreement to co-operate on a combined onshore LNG plant.

The Block 1 and 4 partners, as well as the Block 2 partners and the Government also signed an accord for the project, including the site of the LNG plant and the process for acquiring the land and for how any resettlement will be managed.

“The project is currently in the pre-FEED stage and is expected to enter into FEED following the completion of the LNG site acquisition, the geotechnical investigations and engineering studies,” said Ophir.

“In parallel, the concept selection is in progress for the upstream part of the project which will determine the configuration and production rates from each of the fields,” it added.