Horn Petroleum, a unit of Canada's of Africa Oil Corp., officially started drilling oil in Somalia’s semi-autonomous region of Puntland after reaching long term agreements with the government to tap millions of barrels of oil in Dharoor Valley and Nugal Valley in Bari region, marking the first such drilling in Somalia in 20 years.
Africa Oil Corp, announcing the spudding of the Shabeel-1 well on the Dharoor Block in Puntland, reported that it will take 90 days to reach oil, which is estimated at nearly 300 million of barrels. The second well will be tapped in Nugal Valley.
Puntland President Abdirahman Sheikh Mohamed (Farole), former Puntland President Mohamud Musse Boqor (Adde), Puntland's ministers of Interior Affairs - Abdullahi Ahmed Jama (Ilka Jir), Finance - Dr. Farah Ali, Planning and International Co-operation - Da’ud Mahomed Omar, Security - Khalef Isa Mudan, Ports - Sa’id Mohamed Raage, Africa Oil and Horn Petroleum executives, traditional elders, and Islamic scholars from across Puntland attended the six hour opening ceremony held at the site.
President Farole opened ceremony by remarking that the people of Puntland have been waiting a long time for such an opportunity and expressed his thanks for the hard work and patience of the oil company over the last seven years. "I believe that Puntland's oil production will pave the way for peace and prosperity in the war torn country of Somalia, especially regions controlled by the Puntland," said President Farole.
The president then turned his attention to Somalis and encouraged them to participate in the operation. "I want to tell all Somalis that Puntland will not be selfish if this operation succeeds and every Somali people will have his or her chance for an opportunity. The Puntland government will give their income from the wells to the central government of Somalia if we will have constitution. If we were selfish we would breakway from the rest of Somalia, but we will never do that," he said referring to the recent signing of the Garowe Agreement.
He urged local clans, which had previously attacked an Africa Oil convoy, to forego the violence and to cooperate with peace building in the region.
Local officials explained that the returns on investment will be used to enhance the community.
"Many jobs will be offered to Somalis and funds from the project will be reinvested into Puntland's social services and infrastructure including roads, airports, sea ports, and security facilities," Puntland Petroleum Director Issa Mohamud Farah (Known as Dhollowa) told Somalia Report.
He added that the responsibly for the security of the operation, its employees and equipment will be the responsibility of the Puntland government, which will utilize local police and the Darawish forces. "There will be no other security forces that will come into Puntland for this operation. We will not accept other security to intervene in our country," said Mr. Issa.
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Horn President and CEO David Grellman said during the ceremony that they were pleased with the support of the Puntland government and the commencement of drilling in Dharoor Valley.
"The commencement of drilling in the Dharoor Valley block is a major milestone in the evaluation of the oil potential of Northern Somalia. We have had very strong support from the Puntland regional government and the local communities who are all keen to see development resume in the region after prolonged periods of internal strife. These wells are the first to be drilled into the deep areas of the rift basins and will be key to unlocking the hydrocarbon potential of this unexplored prospective trend," Grellman reiterated in a press release.
Sultan Bashir Konte, a traditional elder from Dharoor, spoke to Somalia Report and reaffirmed his support for the operation. "I welcome this and am very happy about this accord between Puntland and Africa Oil to begin drilling oil. This is good opportunity for the Somali people because if everything goes successfully, then every Somali will get benefit from this well. I have one piece of advise for Puntland officials: they should spend the oil returns on social services especially education and health," said Mr. Konte.
Hussein Abdi Aziz, a Somali political analyst, said this was a very good opportunity if Puntland provides security and creates good governance to ensure that jobless people are employed.
Other Somalis, however, were cautiously supportive of the new oil operation.
A traditional elder in Bari region from Dharoor Valley who spoke to Somalia Report on the condition of anonymity said the Somali people are clan-based and they have borders for the land and warned the government to help his community otherwise they will protest the oil operation. "I will send advisors to the government first to ensure the security and second to ensure development aid is provided," he warned.
Africa Oil Corp had a contract with former President Mohamud Musse Hirsi to begin oil explorations in 2005, but due to government disputes, civil war, piracy, and clan conflicts, the plans were shelved. In 2009, President Farole renewed efforts in oil exploration in Puntland, an area sought after by oil companies for decades. While today Africa Oil, through Horn Petroleum, (80% stake) is working in conjunction with Australia's Red Emperor Resources (20%) and Range Resources (20%) in Puntland, Conoco and Phillips Petroleum (before they merged), Lion Energy (acquired by Africa Oil last year), Canmex, and Consort Private Limited previously had show interest in the region.
"In Puntland, Red Emperor holds a 20% working interest in two licences encompassing the highly prospective Dharoor and Nugaal valleys in 2011. These two exploration areas cover nearly 40,000km2 and have independently been assessed to potentially contain over 19.9 billion barrels of oil in-place," according to their website.
Range Resources explains their role as, "In October 2006 Range signed a Memorandum of Understanding with Africa Oil in relation to an US$50m 80% farm in right in the Nogal Basin and Darin Basin Blocks. This resulted in a Joint Venture project being formalised between Range and Africa Oil which saw the formal signing of the Product Sharing Agreement between Range, Africa Oil and the Puntland Government take place on 17 January 2007. The formal signing of the PSA cemented the ongoing co-operative and committed relationship between Range, Africa Oil and the Puntland government and confirmed the willingness of all the parties involved to develop the natural resources of Puntland."