Mogadishu (LM) The recent agreement between Somalia and Turkey for oil and gas exploration has generated significant attention, but it has also led to widespread confusion and misinformation. Many reports suggest that the Somali public is concerned that the country has “paid” for its oil or that Turkey will take “90% of the oil revenue.” However, a closer examination of the agreement reveals a different reality.
Somalia Retains Ownership of Its Resources
The most crucial aspect of the agreement is that all oil and natural gas resources within Somalia remain national property. The agreement explicitly states that these resources belong to the Somali people, ensuring that no ownership rights are transferred to Turkey or any other company. While Turkey is the operating company for exploration and production, it does not possess rights to the oil assets themselves.
Understanding the 90% Clause
Reports, particularly from the Nordic Monitor, have misinterpreted the so-called “90% clause,” claiming that Turkey will receive 90% of Somalia’s oil revenues. The truth is that this clause pertains to cost recovery. The Turkish Petroleum Corporation (TPAO) is allowed to recover its exploration and operational costs, which may amount to 90% of the annual production.
Once these costs are recouped, the remaining production is classified as “Profit Petroleum,” which is shared equally between Somalia and the operating company. Moreover, Somalia will receive a 5% royalty from the very first day of production, even during the cost-recovery phase.
A Strategic Agreement with Built-In Flexibility
The agreement is set to last for five years, with automatic extensions of three years unless either party provides written notice to withdraw. This provision gives Somalia the option to reassess its position after five years, allowing for potential renegotiation or termination of the agreement if deemed unfavorable.
Why Somalia Chose This Structure
Exploring for oil, especially offshore, involves substantial financial risk and investment. For a developing country like Somalia, which lacks the necessary resources, the cost-recovery structure offers a pathway to international financing without incurring financial risk. This approach ensures that Somalia can benefit from its resources rather than leaving them dormant.
Addressing Misinformation
Misleading claims have been circulating about the agreement. Here are the facts:
- “Turkey is taking 90% of Somalia’s oil revenues” — False. The 90% relates to cost recovery, not ownership of the oil.
- “Somalia has given Turkey the oil rights” — False. The agreement confirms that Somalia retains full ownership of its resources.
- “Somalia only received 10%” — False. The 10% refers to profit-sharing after costs are recovered, and Somalia receives royalties from day one.
Benefits Realized from the Agreement
This agreement provides Somalia with several advantages:
- Royalty from oil production from day one.
- No financial risk related to exploration for the government.
- Full ownership of the oil resources.
- Opportunities for knowledge building, skills development, and job creation.
Conclusion: A Strategic Move for Somalia
The Somalia-Turkey oil agreement is not a threat to the country’s resources but a strategic initiative to develop its natural wealth. With ownership retained by the Somali people, early benefits realized, and risks mitigated, this agreement lays the groundwork for future economic independence and technological advancement.
Somalia is entering a new phase of resource management—one that prioritizes the welfare of its people today and secures a sustainable future for generations to come.
Written in Somali By: Ahmed Ali Sheik
