Somaliland: exploration in 'Africa's 55th state'

Somaliland is not yet recognised as a country by the United Nations but it hopes hydrocarbons will ease its path.

Until 2010, Hussein Abdi Dualeh worked as a simple project manager in Los Angeles overseeing the use of natural gas as fuel for cars. It was a natural progression given his downstream engineering experience and his career start in the UAE as a salesman out of high school, marketing lubricants for Abu Dhabi National Oil Company.

Those days are past. On a trip back to Abu Dhabi this month, Mr Dualeh was feted at a table of honour, knee to knee with Mohammed Al Hamli, the UAE Minister of Energy, and Tony Hayward, the former BP chief executive, in the heart of the luxurious Yas Viceroy hotel. Later, after delivering one of the keynote speeches of the morning to executives from the world's supermajors, he enjoyed a cruise around the island before retiring to his suite.

Such is the life of the new oil minister of Somaliland.

His rapid rise to power is a product of politics and the reemergence of companies questing for oil and gas in a place that has yet to secure its statehood. Like Greenland and Iraqi Kurdistan, where wildcatters are drilling deep for oil, Somaliland administers itself by and large on its own, yet has not been recognised as a country by the United Nations. Like them, it also hopes hydrocarbons can ease its path to statehood.

"You know what really carries the day is not politics, it's geology," said Mr Dualeh. "If the geology is good, all bets are off."

Somaliland has ample history to overcome. In the late 1980s, Chevron was drilling and Conoco laying airstrips thanks to oil concessions granted by the central Somalian government, which included the former Italian colony that today is known as Somalia and, to the north, the former British protectorate that calls itself Somaliland.

In 1991, militias overtook the capital of Mogadishu and deposed the government, sending Somalia into lawlessness and famine and leading foreign companies to declare force majeure. That year Somaliland declared independence.

"We actually think of ourselves as the 55th state in Africa," said Mr Dualeh, pointing out that companies operating there are publicly traded in London and enjoy ample legal counsel. "If you have a company that has a lot of interests in Somaliland, for the safety of their interests they would rather see a full state that they're dealing with - so it will only hasten the day that we're being recognised."

This time around, three independents have signed up to explore Somaliland, the best known of which is led by Mr Hayward - Genel Energy, the Turkish operator in Kurdistan. Genel is to start surveying next month and expects to drill its maiden well at the start of next year, part of a regional exploration programme that includes Morocco and the Ivory Coast.

"The challenge is given the very high quality assets in Kurdistan, how do you replicate it as you go outside?" said Mr Hayward. "Really the only way to do that is through exploration, so what we were looking for is frontier exploration opportunities where we thought there was a possibility of finding large fields."

No one knows how much oil could be underground, in part because the exploration campaigns under the previous government were so brief. Mr Dualeh estimates that reserves could be in the billions of barrels, although he stops short of imagining a future with million-barrel-a-day output and ascendancy to Opec.

Beyond exploration, he hopes to transform the port of Berbera - a three-berth harbour that today exports sheep and frankincense - into an international fuel shipping hub, taking advantage of its deepwater geology and proximity to the Asian maritime transit route. A road and railway are also planned between Somaliland and Ethiopia, with a pipeline for Ethiopian hydrocarbons under discussion. Hopes are high for international companies such as DP World that could invest millions of dollars to transform Berbera into a world-class commercial port.

The drive to industrialise Somaliland came about three years ago with the arrival of a new president, who Mr Dualeh had served as US campaign manager. (A substantial diaspora in America furnishes votes and campaign funds.) The president then tapped him to lead the energy ministry, where he remains the only petroleum engineer.

Mr Dualeh recalled working in the United States 20 years ago and, from afar, following Chevron and Conoco's short-lived exploration campaign.

"They were drilling and I would read this in the papers and say, 'Oh God, I wish I could be a part of this operation,'" he said. "And guess what? I now have the whole thing in my hands."