Somaliland is highly prospective and has not yet explored its natural resources, including petroleum products. Parliament has recently passed a Petroleum Act to attract local and global investors, including international petroleum companies, who have the financial and technical capacity. The law governs the permit holders, contractors, sub-contractors and their workers. The act also lays down rules and guidelines for conducting petroleum activity both onshore and offshore. However, it leaves room for the Minister of Energy and Minerals to issue regulations to regulate specifically.
The law mentions the following types of permits that the companies can acquire or request;
1) Prospecting Permits.
A prospecting permit allows companies to survey and investigate the available oil areas. Then, after careful consideration of the company’s request for the license, the Ministry of Energy and Minerals will issue the prospecting permit within 90 days.
The permit is granted for up to two years, but does not guarantee exclusivity in the area, and other companies may be given similar licenses. Permit holders also do not have an automatic right to exploration and production sharing agreement permits, but they are required to freely share the collected data and information from the area with the Ministry.
2) Exploration and Production Sharing Agreement.
The Ministry of Energy and Minerals will announce an open bid for the exploration and drilling of petrol through publishing the local and international news agencies, and applicants will be required to pay an application fee. Six months after receiving the applications, the cabinet will decide on the winner based on the required capacity; if there are no applicants, the minister can initiate negotiations with any company.
This permit or agreement between the Ministry and the Company has two faces; the exploration stage, whose license is at most ten years, and the drilling stage, which is at most 30 years. Both permits can be extended; and in the case of exploration, the permit holder must apply for the license extension three months before its expiration, whereas a drilling contract (permit) request must be made five years before its end. A ministerial regulation will regulate all the fees required to pay by the applicant or permit holder.
The Act gives the cabinet the power to approve all petroleum contracts and, the Ministry of Energy and Minerals has the power to revoke the permits where there is a violation of this act, The company is in debt or goes liquidation or it's in a court case which likely to cause the liquation.
Rights and Duties of the Permit holder (s).
All the rights and obligations of the permit holder are in the contract with the government. However, the act lays down general rights and duties for the companies doing the petroleum activity.
Rights of the Permit holder.
1. The companies can make a joint venture agreement or cooperate for the exploration and drilling activity; such an agreement shall be notified and given to the ministry.
2. The petroleum company can export the petrol from Somaliland accordingly to the contract.
3. The company can make any necessary developments or buildings on the site after the ministry’s permission.
Duties of the Permit holder.
1. The company must notify and provide the information (exploration stage) of any petroleum findings to the ministry within 48 hours.
2. The company has to protect the petroleum data and give updates to the ministry.
3. The company must protect the safety of the environment and workers’ health.
4. Any other natural resource found in the drilling area must be informed to the ministry as soon as possible.
5. The permit holder must pay all the taxes.
6. The company must submit a closure plan for closing the petroleum activity three years (1 year in the case of exploration) before the license expires.
7. The company or contractor and sub-contractor must have insurance.
8. The company can only transfer its work to a third party if it gets written permission from the ministry.
9. The company must train the local workers.
10. The Ministry must permit any gas release.
The Role of the Ministry
Other than the abovementioned role, including the licensing and permissions related to petroleum activities, the Ministry of Energy and Minerals has a supervisory role; it can appoint an inspector officer to ensure the petroleum company is following this act, regulations and the contract. The officer can enter any premises and request any document needed, which the company must share.
The minister will decide on a specific place for waste storage. It is also responsible for the security and protection of the workers and the site in emergencies.
The Minister will suspend the company’s permit when there is a failure to do the petroleum activity properly. The act also lays down punishments for the companies, such as; a half million US dollar fine or three years of imprisonment or both the companies doing petroleum activity without a permit, any initial production (used or sole) will be compensated by the company. It also punishes the person (or group) who obstructs the activity.
Withholding the information related to the petrol and not submitting the closure plan by the due date are punishable with 20, 000 US dollars and 50,000 US dollars, respectively. under the act.