Senate approves Petroleum Law, sets stage for oil licensing

The Petroleum Amendment Bill was passed Monday by the Senate in a move that now paves way for the country to proceed with oil licensing and production sharing agreements.

Out of 28 Senators present in the House, 24 endorsed the Bill originating from the Lower House while 4 filed a contrary opinion. The Bill now proceeds to the president’s office for assent.

Petroleum Minister Abdirashid Ahmed lauded the passage of the bill as a major milestone.

“This is a major step forward for Somalia and its people as the petroleum law is approved by the upper house and moves closer to completing its legislative process.”

The passage of the amendment Bill now repeals sections of the original law passed by parliament in 2008 to ensure the management of the oil sector is in conformity with international standards. Key among the areas addressed by the newly passed law is the Revenue Sharing Model between the Federal Government and Federal Member States.

The model stipulates that the Federal Government gets 55% of oil revenue from offshore drilling while the Federal Member States will have 45% to be shared between the oil producing and non-oil producing states.

In the event of onshore drilling (drilling under the earth’s surface as opposed to underneath the seabed in offshore drilling), the Federal Government shall be allocated 30% of the revenue while the producing FMS and the hosting districts earn 30% and 20% respectively. The non-producing states shall be entitled to 20% of the revenue.

The passage of the Bill also clears the way for oil licensing and production sharing agreements which have had to be delayed as the country puts in place the regulatory and legal frameworks for the exercise.

The government had set an ambitious timeline of finalizing licensing by this month during a meeting in London last February. However, those timelines have been extended but there are no new guidelines made public on the matter.