Further details have emerged of CNOOC’s oil contract with the Somali government. It grants the Chinese state giant the right to almost half of any profits from production but also promises large bonuses to the Somalis if significant discoveries are made.
A production-sharing contract signed last year gives CNOOC and its partner, China International Oil and Gas, the right to 49 per cent of profits from any oil they discover.
The remaining profit will go to Somalia’s transitional federal government (TFG), which will also receive $50m production bonuses for any wells that yield more than 200,000 barrels a day for 75 consecutive days.
Somalia remains a speculative region for oil exploration. CNOOC is braving insecurity and political uncertainty as an insurgency against the interim government continues in Mogadishu, the capital. But due to China’s thirst for oil, the group has developed a reputation for launching high-risk ventures.