* Somalia to launch licensing round next year
* Horn of Africa nation has been ravaged by conflict
* Piracy in decline, but remains a concern
By Ed Stoddard
CAPE TOWN, Nov 7 (Reuters) - Somalia looks more likely tostrike oil than gas in its long pursuit of offshore riches,making it easier for the African state to exploit any windfallbut also potentially upsetting the fragile recovery led by itsWestern-backed government.
The waters off Somalia, best known for years of piracy, mayharbour hydrocarbons at a depth where crude is usually found,seismic services company Spectrum said last week itsresearch showed. This is unlike the seas further south along theAfrican coastline where gas is abundant.
That would be good news for Somalia, which would likely findpumping out oil onto tankers easier than securing themulti-billion dollar investment needed to liquefy gas forexport.
Oil revenues could transform Somalia's economy, where manypeople rely on subsistence livestock farming. However, it couldprove a challenge for a government trying to rebuild a nationbattered by clan rivalries and Islamist insurgents after itdescended into war in 1991.
"Disagreements between the member states and the federalgovernment could fuel violence and corruption in a country thatis still very much trying to build and extend governance," saidAhmed Soliman, an expert at British think-tank Chatham House.
Some fear oil rigs could also become a new target forpirates, who were the scourge of commercial shipping on nearbytrade routes until naval protection and costly security on shipsdrove them away. The last major hijacking was reported in 2012.
"Somalia is still extremely fragile and hence the risk ofthe piracy resurfacing is a concern," said Cyrus Mody, assistantdirector in the ICC International Maritime Bureau.
SEAS OF BLACK GOLD
Onshore exploration in Somalia took place in the 1950s butthe collapse of the government and ensuing conflict 25 years agokept oil firms away. Much of the geophysical data that had beengathered by the state was lost or destroyed.
But explorers have been spurred on by finds of offshore gasin Tanzania and Mozambique and onshore oil in Kenya and Uganda,although exploiting those reserves has been hamstrung by theslide in oil prices and retrenchment by oil firms.
"It is very prospective," Neil Hodgson, vice president forgeoscience at Spectrum, told Reuters, adding that Somalia'ssource rock was similar to that found in Mozambique and Tanzaniabut the deposits were not as deep, suggesting oil over gas.
Spectrum has acquired 20,000 km of 2D data from thegovernment and shot 20,000 km itself as part of its research.
The so-called "gas window" for gas reserves occurs at depthsof three to six kms and extremely high temperatures. Oil isusually found at lower temperatures, between two and four kms.
ROUND ONE BEGINS
Somalia is pressing on with its exploration plans. Lastweek, officials announced its first offshore hydrocarbonlicensing round at a conference in Cape Town.
The initial round will cover areas off central and southernSomalia and will exclude shallow water block concessions signedin 1988 with Shell and Exxon Mobil.
Abdulkadir Hussein, technical director-general in Somalia'sPetroleum Ministry, said a new majority-state owned national oilcompany and regulatory body should be operational next year.
Initially, the state oil firm would get a free 10 percentstake in all hydrocarbon ventures.
"Later, when the company becomes established it willparticipate with its own money, up to a limit of 30 percent," hetold Reuters.
Jamal Mursal, the Somali Oil Ministry's permanent secretary,said Somalia was working to build capacity to handle the newindustry. "We have more to do but are getting there," he said.
But investors will also need more reassurance about doingbusiness with a government that has had to fend off pastcriticism from donors about corruption and poor management. Thecountry also needs to put in place legislation.
"There's still uncertainty about the exact implementation ofthe petroleum law at all levels of government," said Ed Hobey,an analyst with Africa Risk Consulting. (Editing by Edmund Blair and Alexander Smith)
