As the Gulf, the world’s traditional energy hub, faces growing geopolitical risks, oil companies are looking for new areas with large hydrocarbon potential. Most major exploration efforts are focused on Latin America and West Africa, which are far from the Asia-Pacific region where oil demand is growing the fastest. Somalia presents a different opportunity. One of the industry’s most closely watched frontier wells is being drilled across the Arabian Sea, and if it succeeds, the oil could reach Asian markets without passing through the Strait of Hormuz.
TPAO decided to drill the Curad-1 exploration well after its Oruc Reis seismic vessel collected 4,464 km² of 3D seismic data across offshore Blocks 142, 152, and 153 between October 2024 and June 2025. Early findings from Blocks 152 and 153 suggested significant oil potential, leading TPAO to begin drilling in Block 153 in April 2026 using its own drillship. The well is located about 372 kilometers northeast of Mogadishu in water depths of around 3,500 meters and is expected to reach a total depth of approximately 7,500 meters. Drilling could last up to 288 days, making Curad-1 one of the deepest offshore exploration wells ever drilled.
Somalia’s offshore basin remains largely unexplored. Companies have drilled only eight wells in total, including just two in the Somali Basin, and none has resulted in a commercial oil discovery. Somalia’s updated fiscal terms reflect this high level of exploration risk. Under the country’s 2020 model Production Sharing Agreement, companies can recover up to 70% of oil production and 80% of gas production as cost petroleum, while the government’s share increases as project profitability improves. The revised 2023 PSA replaced the previous sliding royalty system with a flat 5% royalty for both oil and gas. Although a 5% royalty is still considered attractive for investors, it is no longer unusual for frontier offshore projects. It is similar to terms offered in parts of West Africa but higher than the 2% royalty under Guyana’s original Stabroek agreement. Guyana later increased royalties to 10% for new licenses after proving its basin through several major discoveries. Somalia is following a similar approach by offering competitive terms while exploration and security risks remain high.
Companies have explored Somalia since the 1950s, and by the late 1980s, Conoco, Chevron, Eni, Shell and ExxonMobil held licences covering nearly half of the country. Exploration stopped after the outbreak of civil war and the collapse of the state in 1991. Many companies declared force majeure instead of giving up their licenses, leaving those rights inactive for many years. Shell and ExxonMobil later reached agreements with the federal government regarding their previous offshore licenses, while newer blocks went to companies such as Coastline Exploration and operators working with authorities in Puntland and Somaliland. As a result, some license claims now overlap. The federal government has rejected several licenses issued independently by regional administrations, including those claimed by Genel Energy in Somaliland. Somalia’s exploration challenges therefore extend beyond security and disappointing drilling results to include competing claims over offshore acreage.
Curad-1 operates under an agreement between Turkey and Somalia that allows TPAO to recover up to 90% of production after royalties, while royalties remain capped at 5%. The agreement also removes several bonuses and administrative fees. Somalia has accepted lower short-term government revenue to reduce TPAO’s exploration risk and encourage investment. This reflects the government’s broader effort to attract international oil companies.
For TPAO, Curad-1 represents a major step forward. The company has previously taken minority stakes in international projects such as Shah Deniz and Azeri-Chirag-Gunashli in Azerbaijan. In Somalia, however, TPAO is leading the project, carrying out its own seismic surveys, using its own ultra-deepwater drillship and benefiting from Turkey’s wider involvement in Somali infrastructure and security. The company’s biggest technical success remains the Black Sea, where the Tuna-1 well led to the discovery of the giant Sakarya gas field. Curad-1 is its first attempt to apply that experience outside Turkey.
Oil would offer the simplest path to commercial development. If Curad-1 finds a large enough resource, developers could use a floating production, storage, and offloading vessel to process and export crude directly from offshore. Similar deepwater projects in Angola and Brazil can achieve breakeven prices of about $40 to $45 per barrel, but this usually requires recoverable reserves of more than 300 million barrels and favorable reservoir conditions. Smaller or more technically difficult discoveries could remain uneconomic even with attractive fiscal terms.
Gas would present a much greater challenge. Somalia has almost no domestic gas market, no offshore pipeline network, and limited industrial demand to support a large gas project. Developers would most likely need floating LNG facilities and significantly larger reserves to make the project commercially viable. Although Curad-1 may target both oil and gas, oil offers much stronger commercial prospects.
Geography makes Somali oil particularly attractive for Asian buyers. Crude produced offshore Somalia could cross the Arabian Sea without entering the Strait of Hormuz, giving refiners another supply option. India is likely to become the first major market because it lies directly across the Arabian Sea, operates refineries capable of processing different crude grades, and currently depends on Russia for nearly 60% of its crude imports.
If production reaches between 200,000 and 300,000 barrels per day, Somalia could become one of East Africa’s leading oil producers. That would place it alongside Uganda’s Lake Albert project, which is expected to produce around 230,000 barrels per day at peak output. Uganda must transport its crude through the 1,443-kilometer heated East African Crude Oil Pipeline to Tanzania’s port of Tanga. Somalia, by contrast, could export directly from an offshore FPSO, giving it a logistical advantage despite the higher costs of deepwater production.
The proposed 700,000 barrel-per-day Dangote refinery in Lamu, Kenya, could also become an important future customer. Neither the refinery nor a Somali offshore development is expected to begin operating within the next seven to ten years, which means their timelines could align. Somalia may eventually supply a major East African refinery instead of exporting all of its crude to Asia. Even so, the region would probably continue importing refined fuels because oil production alone does not solve refining capacity constraints.
Turkey could also import some Somali crude, particularly if its quality matches Russian, Iraqi, or Kazakh grades already processed by Turkish refineries. However, shipments to Turkey would still travel through Bab el-Mandeb and the Suez Canal, while India remains much closer. Somali crude therefore provides a valuable alternative to supplies moving through Hormuz for Asian buyers, but it does not remove other important shipping chokepoints for Turkey or Europe.
The Curad-1 exploration well has attracted attention because it brings together geology, geopolitics, and global energy trade. If drilling results in a major discovery, Somalia could become an important new oil producer despite decades of conflict and the federal government’s limited control over parts of the country. A successful discovery could trigger new competition over territory and oil revenues, or it could provide the financial resources needed to strengthen state institutions and improve national stability. Whether oil becomes an opportunity or another source of conflict for Somalia will depend on how the country manages its resources in the years ahead.
source: https://oilprice.com/
African Energy Council