A Look at Key Oil Deals in Somalia Amid Oversight Concerns

By T. Roble

Somalia’s petroleum sector has seen a rapid expansion in Production Sharing Agreements (PSAs) in recent years, with a number of contracts signed across offshore and onshore blocks even as oversight bodies continue to raise concerns about transparency and governance.

A May 2025 report by the Financial Governance Committee shows that the Federal Government of Somalia (FGS) signed nine new PSAs in 2024 alone with three entities, adding to earlier agreements concluded in 2022 and significantly widening the country’s exploration footprint.

Among the 2024 awardees were Petro-Quest Africa Exploration, GulfSom Energy, and the Turkish Petroleum Corporation, which secured offshore blocks under the Somalia–Türkiye cooperation framework.

Petro-Quest and GulfSom Deals

Petro-Quest Africa Exploration, affiliated with U.S.-based Liberty Petroleum, signed agreements in March 2024 covering offshore Blocks 131, 190 and 206 along the Juba–Lamu basin. The basin is considered geologically promising due to its extension from hydrocarbon-producing areas in neighbouring Kenya. However, the Financial Governance Committee notes that these contracts were signed without prior review by the Inter-Ministerial Concessions Coordinating Committee (IMCC) and were later put on hold pending oversight.

GulfSom Energy, a Somali company affiliated with Qatar-based Gulf Petroleum, was awarded three onshore blocks in August 2024, including acreage near Afgooye. According to the FGC, these agreements underwent IMCC review before approval, although exploration had not begun as of early 2025.

The Turkish agreements, signed in July 2024, are the most advanced and have already progressed from seismic surveys to preparations for offshore drilling.

Coastline Exploration: From Dispute to Approval

The newer agreements build on earlier PSAs signed in 2022 with Coastline Exploration, which were initially at the centre of a major political and legal dispute.

In February 2022, then-Petroleum Minister Abdirashid Mohamed Ahmed announced the signing of seven offshore PSAs with the company. The move was immediately rejected by both President Mohamed Abdullahi Farmaajo and Prime Minister Mohamed Hussein Roble, who declared the agreements null and void, citing restrictions on major contracts during the election-period caretaker administration.

Auditor General declares Coastline oil deal unlawful, calls for investigations

Critics, including the FGC, also raised concerns over the fiscal terms—particularly a 5 percent royalty rate—as well as the lack of transparency and the failure to submit the agreements to the IMCC prior to signing.

Following the election of President Hassan Sheikh Mohamud, the new administration reviewed the agreements and approved them in October 2022 after introducing amendments aimed at strengthening state protections. Coastline Exploration subsequently paid a $7 million signature bonus to the Central Bank of Somalia.

While the FGC’s May 2025 report noted delays in implementation and outstanding obligations at the time, more recent developments indicate that the company has since been cleared to proceed with its exploration programme, including plans for 3D seismic surveys and initial offshore drilling.

Oversight and Contracting Concerns

The FGC’s 2025 assessment highlights broader risks in the way Somalia has awarded petroleum contracts. It notes that all PSAs signed in 2024 were awarded on a sole-source basis, without competitive bidding.

Echoing advice from the International Monetary Fund, the committee warns that the absence of competitive benchmarks may expose Somalia to fiscal risks and limit its ability to secure favourable commercial terms.

The report also points to inconsistencies in oversight, noting that while some agreements were reviewed by the IMCC prior to signing, others were concluded before undergoing the required scrutiny, with review taking place only afterward or still pending.

Government Response and Reforms

In response, the government says it has taken steps to strengthen oversight, including introducing regulations requiring all PSAs to be reviewed by the IMCC regardless of how they are awarded. Authorities have also indicated that efforts are underway to improve transparency, including the publication of key contract terms.

The FGS has committed not to sign new PSAs until the petroleum sector’s legal framework is fully completed, although this does not apply to agreements under the Türkiye framework, which will continue under a modified review process.

Legacy Oil Majors Re-Engage

Alongside newer entrants, Somalia has also renewed engagement with global oil majors ExxonMobil and Shell.

In 2019, the companies paid $1.7 million to settle outstanding obligations linked to offshore blocks that had remained under force majeure since 1991. A 2020 roadmap agreement set out a pathway to convert their legacy concessions into modern PSAs aligned with Somalia’s Petroleum Law.

As Somalia moves closer to offshore drilling, the growing number of petroleum agreements reflects both ambition and risk. The mix of active, pending, and evolving contracts underscores the importance of strong oversight as the country seeks to develop its energy resources.