Last month, Soma Oil and Gas, a London based energy company, searching for hydrocarbon deposits off the coast of Somalia, announced that it had completed a seismic survey to ascertain the potential for recoverable oil and gas deposits. Although further details have yet to be released, chief executive Rob Sheppard announced that the results were encouraging. However, Somalia, and potential investors, should proceed with caution when considering entering this frontier market.
East African oil exploration, and in Somalia specifically, is not a secret. Energy firms like Royal Dutch Shell and Exxonmobil operated in Somalia before the government collapsed in 1991. But recent gains against the insurgent group al Shabaab in the south and the decrease in piracy off the coast have sparked a regeneration of the industry. The Somali president, riding these positive evolutions, recently stated that the country is “open for business.”
Although recent security developments are encouraging, substantial hurdles still exist. The Heritage Institute recently released “Oil in Somalia: Adding Fuel to the Fire?,” by Dominik Balthasar. The paper discusses how the oil industry in Somalia could have a promising future, but it also explores the risks facing Somalia if the development of its petroleum resources is not carefully managed. Balthasar rightly asks, “is Somalia ready for oil?”
The historic challenges that have limited business opportunities in Somalia, domestic insurgency and piracy, have diminished for now, but these threats have not disappeared. Al Shabaab has been largely pushed out of southern Somalia by multinational forces, but has recently proven that it is still able to operate in the north of Kenya. As Kenya flexes to counter al Shabaab in its own country, it could provide an opportunity for al Shabaab to return to its previous strongholds in Somalia. And even as piracy has largely stopped, it is conceivable that al Shabaab or others could see oil tankers as opportunities to resurrect that practice as well.
This article has been extracted from http://nationalinterest.org, please click on this link to read the http://nationalinterest.org/blog/the-buzz/somalia-the-next-oil-superpower-12041
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