Turkey Somalia sign Oil/Gas deal. Turkey secures rights to 90 percent of oil and gas output in Somalia

Suldaanka · March 7, 2024, 12:46pm

Hydrocarbons: Türkiye and Somalia sign an agreement for exploration and exploitation

Bilateral ties have been further strengthened following the conclusion of a defense agreement last month

Ankara

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March 7 2024

Turkey and Somalia have struck a deal for energy exploration and drilling, further solidifying bilateral ties following the conclusion of a defense deal last month. The agreement signed in Istanbul between the Turkish Minister of Energy, Alparslan Bayraktar, and the Somali Minister of Petroleum and Mineral Resources, Abdirizak Omar Mohamed, aims to exploit hydrocarbon reserves in Somalia’s exclusive economic zone, untapped since the collapse of the Somali government in the early 90s, and also includes land exploration. This development follows the signing in January of an agreement between Ethiopia and Somaliland, which granted Ethiopia access to ports along the coast overlooking the Gulf of Aden in exchange for recognizing the breakaway region’s independence . In response, Ankara concluded a comprehensive naval defense agreement with Somalia last month, which authorizes Turkey to defend Somali marine waters from terrorism, piracy and external threats for the next ten years.

The agreement signed today, described as “historic” by the Middle East Eye news website, gives Turkey the right to develop Somalia’s marine resources in its exclusive economic zone. The Turkish Navy is already active off the coast of Somalia and in Gulf of Aden as part of a multinational anti-piracy mission since 2009. Turkey, with its experience in offshore energy exploration demonstrated by the discovery of gas in the Black Sea in 2020, is now engaged in developing gas for domestic consumption. According to a US Department of Commerce estimate, Somalia has oil and gas reserves of at least 30 billion barrels, but exploitation requires investments that could take three to five years. In 2022, the Somali government signed an exploration agreement with US-based Coastline Exploration for seven offshore blocks, with drilling expected to begin in 2025.

Somaliland, an autonomous northern region without international recognition, has signed an exploration agreement with the British General Energy in 2022. Drilling, which could lead to the discovery of 5 billion barrels of oil, is expected to begin later this year. However, Mogadishu rejected the agreement, considering it illegitimate. According to the “Middle East Eye”, the agreement between Turkey and Somalia will require huge efforts on the Turkish side for the exploration and development of resources, with a potential cost of at least half a billion dollars for exploration and several billion for continuous development. Currently, it is unclear whether Turkey will seek funding from private or public partners to support such projects.

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Uusmiir · April 23, 2025, 5:48am

The recently disclosed text of the hydrocarbon agreement has revealed a series of provisions that significantly favor Turkey’s operational and financial position in Somalia’s energy sector.

One of the most notable clauses removes the need for Turkey to pay any upfront costs. According to the agreement, no signature, development or production bonuses are required from Turkish entities, nor are they obligated to pay surface or administrative fees. These exemptions, outlined in the document’s Article 4.5, deviate from standard industry practices where host governments typically demand substantial initial payments for exploration rights.

In terms of revenue structure, Turkey has secured a highly favorable cost recovery arrangement. Under Article 4.7, Turkey is entitled to recover up to 90 percent of the petroleum it produces each year — whether oil or natural gas — as “cost petroleum,” a mechanism that allows the operator to cover exploration and production expenses before profits are shared.

Meanwhile, Somalia’s own share of the production is limited through a royalty cap set at just 5 percent. The royalties can be collected either in kind or in cash and do not apply to any petroleum that is reinjected into the reservoir or consumed during on-site operations.

Further enhancing its operational freedom, Turkey has been granted unrestricted rights to export its share of oil and gas at international market prices. As detailed in Article 4.8, Turkish entities may retain all revenue earned abroad from the sale of these resources whether through exports or domestic transactions — an arrangement that effectively removes Somalia from the financial flow of Turkey’s share.

Additionally, Turkey enjoys broad discretion in assigning its rights under the agreement. Article 4.3 allows Turkish Petroleum Corporation (TPAO) or any other designated Turkish entity to transfer its interests to third parties without the obligation to establish a local company or permanent office in Somalia. This clause provides Turkey with flexibility in forming partnerships or bringing in subcontractors without bureaucratic hurdles.

The military school within the Turkish Task Force Command in Somalia (STGK), Turkey’s largest military base abroad, also plays an important role in meeting the needs of commissioned and noncommissioned officers in Somalia.

Finally, the agreement includes robust investment protections. Article 9 confirms that Turkish operations in Somalia will be protected under the 1966 Convention on the Settlement of Investment Disputes (ICSID). Any disputes arising from the interpretation or implementation of the agreement can be brought before an international arbitration panel seated in Istanbul, ensuring that Turkey can settle conflicts on its own legal turf with guarantees rooted in international law.

The agreement also permits Turkey to take its own supplementary security measures, with all related expenses counted as recoverable petroleum costs (Article 6). This clause is seen as directly connected to a presidential decree also submitted to parliament that seeks authorization to deploy Turkish naval and military personnel to Somalia for two years.

The deployment, according to Turkish authorities, will support counterterrorism and anti-piracy operations while also securing Turkish exploration missions. Starting in September 2025, the research vessel Oruç Reis, escorted by five Turkish navy warships, will begin exploration activities in Somali maritime zones.

The decree emphasizes Turkey’s goal of protecting Somalia’s natural wealth while contributing to regional security and the stability of key international trade routes, especially in the Gulf of Aden and the Arabian Sea.

This latest agreement builds on a February 2024 memorandum of understanding in which Somalia granted Turkey privileged access to its special economic zone and promised revenue-sharing mechanisms. Turkey, in return, pledged to assist in Somali defense capabilities, particularly in the development and training of the Somali navy.

According to Somali officials, Turkey will receive up to 30 percent of the revenue from oil and gas extracted in Somali waters in proportion to the projects it contributes to.

The hydrocarbons agreement also reaffirms Somalia’s sovereignty over its resources while recognizing Turkey’s role in their potential extraction, monetization and commercialization through joint long-term ventures.

Text of the hydrocarbon agreement between Turkey and Somalia.