Oil Report

Canada's Africa Oil starts Somalia seismic survey

DHAROOR, Somalia, May 21 (Reuters) - Canadian oil and gas exploration company Africa Oil Corp. AOI.V, has started seismic mapping of a remote area in Somalia's relatively stable Puntland region, officials said on Wednesday.

The survey is in advance of exploratory drilling in Somalia’s Puntland region, where the company believes there is a strong prospect of finding rich oil deposits like those in geologically similar Yemen, a neighbour across the Gulf of Aden.

The predecessor of ConocoPhilips COP.N, Conoco, had exploration rights in the semi-autonomous northern Puntland area before the 1991 civil war that plunged the Horn of Africa nation into anarchy from which it has not yet escaped.

Africa Oil has rights to 80 percent of the Nugaal and Dharoor blocks there, with its joint venture partner, Australian independent Range Resources RRS.AXRRL.AX, holding the remainder.

“It’s an exploration,” senior company official Kim Watson told Reuters on the site in Dharoor, as dozens of the engineers from the U.S., Europe and Africa were busy setting up shop under the watch of heavily armed Puntland troops.

Africa Oil is obliged to spend $50 million on exploration to obtain full rights to the 80 percent, and it has the right to farm out 20 percent of that stake to third parties with the agreement of Range Resources.

Puntland’s government in January 2007 entered into a production-sharing agreement with the two companies.

The site is a humid, barren area of about 2,600 sq km (1,004 sq miles) near Dharoor town, some 350 km (217 miles) east of the port of Bosasso on the Gulf of Aden.

“The exploration will run until December when we hope to start drilling for oil. We have heavy equipment to conduct a 2,500 sq km seismic survey,” he said. A hundred local people have been employed in the operation, he said.


Watson also said they have carried out a similar survey in nearby Nugaal region. Both Range and Africa Oil have been given access to seismic data collected before 1991, and have expressed optimism they will strike oil.

In 2007, Puntland faced stiff opposition from the internationally recognised interim Somali government, part of which refused to honour a 2005 deal reached with Range giving it exclusive concession rights over all minerals and petroleum.

The fight caused a split between President Abdullahi Yusuf -- who hails from Puntland -- and former Prime Minister Ali Mohamed Gedi, who later resigned.

Many believe Gedi’s resignation was sparked by his losing the fight with Yusuf, who was formerly Puntland’s president and who has blessed the current deal.

Some clans in Puntland have already expressed unhappiness with the oil deal, raising the prospect of the type of local conflict that has heavily contributed to the nation’s persistent anarchy.

Somalia has no proven oil reserves but a joint World Bank/U.N. survey of northeast Africa 16 years ago ranked it second only to Sudan as the top prospective producer. (Additional reporting and writing by Guled Mohamed in Nairobi; Editing by Bryson Hull and James Jukwey) (For full Reuters Africa coverage and to have your say on the top issues, visit: