Currently thought of as the petroleum sector’s latest ‘frontier region’, Somalia constitutes not only one of the most promising, but also most the most challenging of potential oil exporting countries. Whereas international enterprises face risks with regards to political fragility, legal ambiguity, and physical insecurity, Somalia looks down the barrel of the negative political, economic, and social effects of the ‘resource curse’.
The country also has to confront a variety of additional challenges that are certain to arise from oil exploration and production in the context of its nascent state-making endeavour. One key risk is that the development of its petroleum resources is likely to catalyse an already tense situation, enhancing the danger of violent conflict in the country. In order to oil rather than spoil ongoing processes of state-making and development in Somalia, all involved need to exercise utmost caution in further developing Somalia’s hydrocarbon potential.
The recent resource bonanza in East Africa has not stopped at the borders of one of the most fragile states in the world. Instead, Somalia finds itself canvassed by a range of international oil and gas companies, which are attracted by the large profit margins that accrue from developing the fragile country’s hydrocarbon potential.
Ever since the first well in Somali soil was drilled by Sinclair in 1945, a total of about seventy have been sunk. After major oil companies declared force majeure and abandoned the country in the years surrounding the end of the Cold War, newcomers have more recently embarked on exploring the country’s hydrocarbon potential. Although information about Somalia’s fossil fuel endowments remain scant, they are estimated to be as high as 110 billion barrels, putting the state at eye-level with Kuwait.
The stakes are high and the development of its natural resources holds significant potential for the country. Somalia’s geological formation shows striking parallels to those of oil-rich Yemen across the Red Sea and provides an opportunity to lift the destitute Somali nation above a per capita GDP of about $ 112 (see UN Data). Yet, such a positive trajectory is by no means assured, as the development of Somalia’s hydrocarbon resources faces a host of serious challenges that could not only jeopardize the country’s oil production, but its very state-making.
A recent policy brief entitled “?” published by the Heritage Institute for Policy Studies in Mogadishu, aims to address this question. Although the conundrum of whether Somalia’s hydrocarbon endowments will ultimately be a boon or bane hinges on a multitude of variables and evades simple projection, the paper cautions against a ‘business as usual’ approach.
