The presence of oil in Somaliland has been confirmed by a recent exploration. The discovery has raised the stakes in Somaliland's claim for independence from
What is Somaliland's hydrocarbon potential?
In 2020, Norwegian seismic survey company, TGS, estimated that the Somali basin as a whole likely holds offshore reserves of about 30 billion barrels, with additional onshore reserves, although land estimates are considerably less consistent. Assessments generally include Somaliland and would place
Geological conditions seem to support the view that there are likely to be commercially viable deposits in the region. Whether they prove close to estimates remains unknown at this stage.
There is also evidence of offshore (undersea) reserves in the region, as well as onshore (beneath the land) in the Somali region of the neighbouring
Why has it taken so long to make an oil find?
This find is being billed as the first discovery in Somaliland but in fact there have been several instances of oil seepage. An oil seep occurs when geological or unrelated human activity results in oil "seeping" into the ocean or onto land. In such cases, the physical appearance of oil occurs unexpectedly rather than as a result of deliberate exploration. It is unsurprisingly taken as evidence of a substantial reserve that is close to the surface, but doesn't always indicate the presence of commercially viable quantities or accessibility.
Progress has been slow because Somaliland's lack of international sovereign recognition creates an uncertain context for significant investment.
This creates a vacuum. The Somali federal authorities cannot enter into meaningful agreements over exploration or extraction in Somaliland. Somaliland is limited by investment risk. And
This has not stopped Somaliland from entering into agreements, but it has slowed activities taking place under them.
In addition, there have been disputes within Somaliland over how the proceeds of hydrocarbon exploitation would be shared.
One of the areas with significant potential is the
The most recent find is in a different area of Somaliland: Salaxley in the Maroodi Jeex region, which is less politically volatile. This makes it more likely that
What challenges lie ahead?
The uncertainty created by a lack of international recognition makes it difficult to mobilise sufficient investment. And there is little doubt that
Similarly, local sensitivities around the sharing of financial rewards will need to be managed with care and deep local engagement.
Some commentaries have suggested that the newly discovered oil could be abundant. But the reserves could also prove limited and may present technical challenges in extraction. It is therefore possible that extractive plans will operate at the margin of financial feasibility.
The latest find was the result of an accidental release of oil during drilling for water rather than from deliberate exploration. This may be evidence of a significant and easily accessed reserve, but seepages and strikes like this have happened in the past in Somaliland. A more extensive geo-seismic surveying will be needed before the full extent of the reserve is confirmed.
What would be the political implications of oil wealth in Somaliland?
I had previously studied the place of oil in
Previous experience of exploration in the
The area of the latest find, around Salaxley, is likely to prove less volatile. Unlike the
Depending on how negotiations conclude, there is potential for this clan-based process to mitigate the "resource curse" effect. In other words, the system of inter-group negotiation that underpins Somali society might provide some protection from the narrow economic impact of oil wealth that has been felt elsewhere. However, that is by no means certain and the process of negotiation itself has the potential to fuel violence, just as the
Either way, the Somaliland economy remains tiny. Any influx of significant new wealth, even on a fairly modest scale, will create new social, economic and therefore political tensions.
What are the implications for regional dynamics?
The regional impact will depend on the extent of the discovery.
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