(Reuters) – A dispute between two semi-autonomous regions in Somalia is delaying exploration for oil and gas over fears that local authorities are issuing licences to explore blocks that overlap in each other’s territories, officials said.
East Africa has become a hot spot for oil and gas exploration after new finds in waters off countries including Uganda, Tanzania and Mozambique.
The boom has led to speculation about the potential for finding oil offshore Somalia in the Horn of Africa, which so far has no proven hydrocarbon reserves.
“Put it this way: Puntland and Somaliland have what’s called ‘disputed areas.’ It’s really created a quagmire,” said Ali Abdullahi, the chief executive officer of Amsas Consulting, a Somali firm that advises private oil firms in the region.
Somaliland, which declared its independence from Somalia in 1991 but is still not recognised internationally, has been relatively stable compared with other parts of the country, which has lacked effective central government for two decades.
Although Puntland is also stable, it is notorious for piracy and has frosty relations with Somaliland.
Both regions claim they control a disputed area known as Sool, Cayn and Sanaag (SSC).
Within that zone lie nearly a dozen oil blocks, mostly unlicensed, demarcated by Puntland and Somaliland authorities, according to a map from data firm IHS.
Companies are unsure whether their contracts with the local authorities to drill wells will remain valid.
The dispute between Somaliland and Puntland mirrors another between Kenya and Somalia over their maritime border, which may also deter oil exploring firms.
In March, Canadian firm Horn Petroleum, and its exploration partners, including Vancouver-listed Africa Oil Corp., started drilling in the Dharoor Block, located in the northeast part of Puntland.
Oil consultant Abdullahi and other Somali oil analysts have claimed, furthermore, that any find by Horn Petroleum in Dharoor may be threatened by the fact that state-controlled Italian explorer Eni may still have legal rights to the block.
Eni was issued a license by the Somali government in the 1980s to explore Dharoor.
Both Eni and Horn Petroleum declined to comment.
Additionally, another block licensed by Horn Petroleum and its working partners in the western part of Puntland, known as the Nugaal Block, overlaps a block licensed by Somaliland to unlisted British explorer Asante Oil.
“We are aware that there are overlapping claims in the Nugaal block but don’t wish to comment publicly,” said Keith Hill, chairman of Horn Petroleum, in an email to Reuters.
“We believe this is a matter best resolved directly by the respective parties.”
Asante Oil could not be reached for comment.
For their part, Somaliland and Puntland each deny they have encroached on the other’s territory. They blame the other side for licensing blocks in areas that don’t belong to them.
“There were a lot of stories about overlapping licenses, (but) it is clear that Somaliland doesn’t make any claim beyond the colonial borders that were demarcated,” Hussein Du’ale, the minister of mineral resource, energy and water, told Reuters.
In an interview in Somaliland’s capital Hargeisa he said the Nugaal Basin, where the Nugaal Block is located, is 80 percent owned by Somaliland, and the licenses issued by Puntland authorities to the same stretch of land are invalid.
“We recognize that there is license given by the administration of Puntland, which claims that this is part of their territory,” Du’ale said
“If you look at the colonial border this goes deep into Somaliland territory. We don’t … claim areas in Puntland, and we hope that our brothers will reciprocate.”
Issa Mohamud Farah, Puntland’s petroleum director, who is in charge of oil exploration, was unavailable to comment.
Without a central government, analysts said it is unclear how and when the potential oil and gas reserves believed to be in Somalia can be explored.
“The (Somali) federal government has been weak for a very long time,” said Abdullahi, the oil consultant.
“That leaves the question of who’s right and who’s wrong here? It’s so hard to know.”