Exploration rights in Somalia for Chinese oil giant CNOOC

Crude drops despite inventories, storm, OPECCNOOC, the Chinese state oil giant has been granted permission to explore for oil in part of Somalia, one of Africa’s most volatile regions. This move highlights China’s enthusiasm in its search for natural resources.

Somalia has been a forbidden area for US oil companies since the early 1990’s following its descent into anarchy. The capital, Mogadishu, has experienced severe violence for the last 16 years. However, this has not put off CNOOC and in June the group met with Somali government officials in Nairobi to thrash out the details of its planned exploration, due to begin in the autumn. The deal with Somalia’s government gives it exploration rights in the north Mudug region, 310 miles north-east of the capital.

The US Energy Information Administration has commented that Somalia has no established oil reserves and only 200bn cubic feet of proved natural gas reserves, which have not been tapped.

Exploration concessions were held by companies including Conoco and Phillips, now known as Amoco, part of BP and Chevron, this took place in the late 1980’s but they left the country after dictator Mohamed Siad Barre was overthrown during civil war in 1991.

The information collected by oil companies has formed the basis of current interest in Somalia. An oil group listed in Sydney, Range Resources, anticipates that the Puntland province, which includes the Mudug region, has the potential to produce 5 billion to 10 billion barrels of oil.

A new national oil law is being prepared by the government. Its choice to permit CNOOC exploration rights in Puntland could cause a dispute with local authorities, which have provided Range Resources exploration rights elsewhere in the province.

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