Could Somalia See The World's Next Major Oil Discovery?

The Curad-1 exploration well was appraised after TPAO's Oruc Reis vessel collected 4,464 km2 of 3D seismic data across offshore Blocks 142, 152, and 153 between October 2024 and June 2025. Early results from Blocks 152 and 153 were encouraging, pointing to vast oil reserves, and TPAO started spudding the well in Block 153 in April 2026 using its own drillship. Located about 372 kilometres northeast of Mogadishu in roughly 3,500 metres of water, Curad-1 is expected to reach a total depth of around 7,500 metres. Drilling could take up to 288 days and will make it one of the deepest offshore exploration wells ever attempted.

Somalia's offshore remains largely unexplored: only eight wells have been drilled historically, including just two in the Somali Basin, and none have produced a commercial discovery so far. Hence, the risk is reflected in the country's recently revamped fiscal terms. Under Somalia's 2020 model PSA, companies may recover up to 70% of oil and 80% of gas production as cost petroleum, while the government's share of profits rises as project returns improve. Somalia's revised 2023 PSA model has replaced its broad sliding royalty system with a flat rate of 5% for both oil and gas. To give a perspective, internationally a 5% royalty remains relatively generous to investors, but it is no longer exceptional for frontier offshore acreage. It is broadly comparable with smaller West African deepwater contracts and well above the 2% royalty granted under Guyana's original Stabroek agreement. However, it remains only half the 10% royalty Guyana introduced for new licences after its basin had been de-risked by a succession of major discoveries. Guyana's progression illustrates the logic behind Somalia's positioning: low-to-moderate royalties can be justified while geological and security risks remain extreme.

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Somalia has attracted explorers since the 1950s, and by the late 1980s, companies including Conoco, Chevron, Eni, Shell, and ExxonMobil held concessions covering almost half of the country. Exploration stopped when the state collapsed in 1991 due to a civil war, but many companies declared force majeure rather than formally relinquishing their acreage, leaving legacy rights legally dormant for decades. Shell and ExxonMobil later reached a roadmap agreement with the federal government covering their old offshore interests, while newer licenses were awarded to companies such as Coastline Exploration and to operators working through the authorities in semi-autonomous regions of Puntland and Somaliland. This created overlapping and contested claims, as Mogadishu has rejected some licenses granted independently by regional administrations, including those claimed by Genel Energy in Somaliland. Somalia's exploration problem has therefore been not only disappointing wells and insecurity, but also a fragmented licensing map in which old concessions, new federal awards and regional permits have sometimes competed for the same acreage.

Curad-1 operates under a Turkey-Somalia agreement, according to which TPAO may recover up to 90% of production after royalties, which are capped at 5%, while several bonuses and administrative charges are waived. Somalia is therefore accepting lower early revenues to reduce TPAO's exploration risk and improve the chances of eventual development – a clear government strategy to curb the risks and make the country attractive for international companies.

For Turkey's state oil company TPAO, Curad-1 marks a significant shift. Internationally, the company has often participated as a minority partner in established projects, including Shah Deniz and Azeri-Chirag-Gunashli in Azerbaijan. Somalia is different: TPAO is combining operatorship, proprietary seismic acquisition, a company-owned ultra-deepwater drillship and broader Turkish involvement in Somali infrastructure and security. Its strongest technical success is the Black Sea, where the Tuna-1 well led to the giant Sakarya gas discovery several years ago. Curad-1 is its first serious attempt to export that model.

An oil discovery would be the easier commercial outcome. A sufficiently large discovery will be developed through a floating production, storage and offloading vessel (FSPO), allowing crude to be processed and loaded directly at sea. Comparable ultra-deepwater projects in Angola and Brazil can approach breakeven prices of around $40-$45/bbl, but usually only where recoverable resources exceed 300 million barrels and the reservoir is manageable. A smaller or more complex discovery could struggle even under such favourable fiscal terms.

Gas would be harder. Somalia has no meaningful domestic gas market, no offshore pipeline network and little industrial demand capable of anchoring a large development. Commercialisation would most likely require floating LNG and a much larger reserve base. Curad may target both oil and gas, but the economics strongly favour oil.

For Asian refiners, geography is the real prize. Somali crude could move across the Arabian Sea without entering Hormuz, giving buyers a rare diversification barrel close to the region. India would be the natural first market: it sits directly opposite Somalia, has refineries capable of processing a wide range of grades and currently relies on Russia for close to 60% of its crude imports.

A development producing 200,000-300,000 b/d would also reshape East African oil trade. At that scale, Somalia would rival Uganda's Lake Albert project, designed to peak at around 230,000 b/d. Ugandan crude must travel through the 1,443-kilometre heated East African Crude Oil Pipeline to Tanzania's port of Tanga, while Somali FPSO could export directly offshore – this offers the Somali project simpler logistics despite higher deepwater costs.

Moreover, the proposed 700,000 b/d Dangote refinery in Lamu, Kenya, presents a potential outlet. Both projects are unlikely to become operational before the next seven to ten years, leaving time for their timelines to converge. Somalia could eventually supply a major East African refinery rather than export every barrel to Asia. However, even then, the discovery is unlikely to end the region's dependence on imported fuels: crude production and refining capacity are separate constraints.

Turkey could take some of the crude, particularly if its quality resembles Russian, Iraqi, or Kazakh grades already processed by Turkish refiners. Yet shipments to Turkey would still pass Bab el-Mandeb and Suez, while India is considerably closer. Somali oil would therefore be a strong Hormuz-diversification barrel for Asia, but not a chokepoint-free barrel for Turkey or Europe.

The Curad-1 exploration well is bound to keep the markets abuzz, and it is because it sits at the intersection of geology, geopolitics and trade. If Somalia's exploration story turns into a success, a major new oil story could emerge in a country that has been torn by internal conflict for decades, with large parts of its territory still beyond the effective control of the federal government. The result could be another major struggle over territory and revenues – or, alternatively, a substantial financial foundation that would finally allow the central government to strengthen the state and regain control over the country. Whether oil becomes a blessing or a curse for Somalia is something only the future will show.

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