By Mohamed Okash - The Founding Director of the Institute of Climate and Environment at SIMAD University.
“Somalia stands at a pivotal economic crossroads as it begins its first offshore oil drilling campaign in decades—an opportunity long seen as a path to prosperity, yet far from guaranteed. With the launch of the Curad-1 well, the country now faces a defining test of governance that will shape its future”.
Growing up, I often heard that Somalia’s untapped natural resources would one day transform the country’s economic fortunes. That promise is now beginning to materialise with the arrival of the Turkish drillship, the Çağrı Bey, at the port of Mogadishu, which is set to begin drilling the Curad-1 well this month.
This is Somalia’s first offshore drilling campaign in recent history and could unlock long-anticipated economic potential. Research shows, however, that the trajectory of economic development is shaped less by resource endowments than by the quality of institutions that govern, regulate, and reinvest for the public good.
In this context, oil is not inherently transformative; it is institutions that determine how its proceeds are allocated, regulated, and reinvested. In other words, the success of Somalia’s oil strategy ultimately depends on governance decisions.
Somalia must leverage oil revenues to build a skilled workforce and strengthen the economy’s productive capacity. Failing to do so risks deepening poverty and inequality and squandering a once-in-a-generation opportunity for national transformation.
Institutions, Not Oil, Will Determine the Outcome#
The experience of other resource-rich countries offers both guidance and caution. Botswana invested its resource wealth in public goods and long-term growth. Countries such as Saudi Arabia and the United Arab Emirates have used oil revenues to diversify their economies and invest in renewable energy, positioning themselves for a post-oil future.
Yet the risks are equally clear. Nigeria’s oil wealth coexists with persistent poverty, largely due to weak governance. In Angola, overreliance on oil has limited diversification and increased vulnerability to price shocks. In South Sudan, oil revenues have fueled instability and deepened economic fragility. These cases underscore a central reality: oil does not determine outcomes—institutions do.
Somalia’s oil strategy now faces similar governance decisions. To succeed, transparency must be absolute. Contracts, licensing agreements, and revenue flows should be publicly disclosed and subject to independent oversight.
A sovereign wealth or future generations fund should be established with clear fiscal rules to prevent short-term capture and ensure long-term investment. Revenue-sharing mechanisms must be clearly defined across federal and member state levels to avoid conflict and strengthen national cohesion.
Environmental safeguards must also be rigorously enforced. The Somali Petroleum Law 2020 already provides a legal foundation, but implementation will be decisive. Equally important is building domestic capability.
Oil should not become an enclave sector dominated by foreign firms. Somalia must invest in technical skills, local businesses, and regulatory institutions to ensure that its people participate meaningfully in the sector.
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Climate Risk Is Already an Economic Constraint#
To be sure, this offshore drilling campaign comes at a time when the global energy system is rapidly transitioning away from fossil fuels. For one of the most climate-vulnerable countries on earth, this may appear contradictory. In reality, it reflects a deeper problem: fragile states are being asked to adapt to climate change without being given the resources to finance that adaptation.
Somalia ranks among the world’s most climate-vulnerable and least climate-ready countries, according to the ND-GAIN Index. According to the World Bank’s Somalia Country Climate and Development Report, climate change is already constraining Somalia’s economy.
Without adaptation, climate impacts could reduce GDP by up to 13.5 percent by 2060. Recurrent droughts and floods are eroding livelihoods, displacing communities, and deepening poverty. The scale of the challenge is immense.
Another report suggests that Somalia’s climate adaptation needs are expected to exceed $10 billion by 2030, far beyond its current fiscal capacity. At the same time, access to climate finance remains slow and uncertain, while global development assistance is declining.
Somalia is therefore caught between rising climate risk and shrinking financial support. In that context, oil is not a departure from climate ambition—it is a financing strategy in the absence of viable alternatives.
Indeed, many climate-vulnerable and fiscally constrained countries may soon face similar choices as global aid declines and climate risks intensify. Somalia, however, is entering the fossil fuel market late, which makes the margin for error narrow.
Charting a best-case scenario for Somalia’s oil sector will require more than revenue management; it will require deliberate investment in people and institutions. This means rapidly cultivating a new generation of energy professionals, technical labour, legal experts, regulators, and economists capable of operating in a complex, globally integrated industry.
Under conditions of transparency, accountability, and strategic policy design, the oil sector can serve as a catalytic source of capital, helping to transition Somalia toward a more diversified and sustainable economy.
If mismanaged, however, it risks deepening structural inequalities.
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Mohamed Okash is the Founding Director of the Institute of Climate and Environment at SIMAD University. He is also a member of the World Economic Forum’s Global Future Council on Climate and Nature Governance.
**The opinion expressed in this article are those of the author and do not necessarily reflect the views of Dawan Africa.