Africa Energy has dropped its exploration acreage in Somalia’s breakaway state of Puntland citing uncertainties over the current political climate between regional authorities and the central government in Mogadishu.

The Vancouver-based explorer said late Monday it had notified the autonomous state of Puntland it plans withdraw from its production sharing agreements for the onshore Nugaal and Dharoor blocks.

Africa Energy, formerly Horn Petroleum and part of Sweden’s Lundin Petroleum, picked up a majority stake in the two exploration blocks in 2007 from Australia’s Range Resources. It said the notification to exit the blocks is effective immediately.

The company said its decision to exit the blocks is a result of “the disagreement between the Federal Government of Somalia and the regional government of Puntland over the legitimacy of the PSAs, and potential territorial claims on the Nugaal Block, as the principal reasons for its decisions.”

The company was planning to test Jurassic rocks with its Puntland blocks which it hoped were analogous to large oil fields across the Gulf of Aden in Yemen. Africa Energy currently holds a 60% stake in the two blocks, with Range Resources and Red Emperor Resources each holding a 20% interest.

In March, Africa Energy announced a corporate strategy to take advantage of the downturn in oil prices by pursuing onshore and shallow-water upstream oil opportunities in Africa. No mention of Puntland was made at the time.

Somalia’s federal government has been at odds with the administrations in Puntland and Somaliland over responsibility for administering oil and gas activity, particularly as a number of companies signed deals with regional administrations in the years when Somalia suffered an absence of central government.

Shell and partner ExxonMobil declared force majeure on their Somali acreage in the 1990s due to worsening civil conflict in the region and Puntland continues to challenge the exploration deals.

Source: Platts Energy