Understanding the Somali–Turkey Hydrocarbon Agreement in Simple Break Down
Somalia has entered into a Production Sharing Agreement (PSA) with Turkey for oil exploration and production. This agreement outlines the relationship between the Somali government and Turkish companies and is a crucial part of Somalia’s oil industry development. However, there has been some confusion around what these agreements really mean for the Somali people, especially when it comes to how revenue is shared. To clarify, let’s break down the agreement with some simple examples and figures. The Key Points of the Agreement The PSA between Somalia and Turkey specifies several financial mechanisms that govern how oil revenue is divided. Some of the most important mechanisms are: Royalty : This is a percentage of the production that Somalia receives directly, in either cash or kind (oil). Cost Recovery : This clause allows the Turkish companies to recover the costs they spend on exploring, drilling, and producing oil, but only up to a certai...