The Perth-based company told the ASX last week that it had entered a conditional heads of agreement to acquire a 50.1% interest in the exclusive rights to all hydrocarbon and mineral exploration and development in the state. Puntland covers 212,000 square kilometres or one-third of Somalia.

Range said it believed the area had all the pre-requisites to become a major oil-producing province, while its other mineral potential was largely unexplored.

Range will pay Consort Private – a firm set up by Puntland authorities – an initial US$1.5 million (A$2 million) for the 50.1% interest, with further payments totalling $4.4 million, along with 85 million Range shares and options. It is working on a capital raising to get the project off the ground.

Under the agreement, Range’s role would be to assess the exploration potential of Puntland and then farm out prospects to large oil and mining companies.

Range said it viewed Puntland as “one of the last under-explored countries in the world that has high potential for vast reserves of hydrocarbons.”

Significant exploration of the state had occurred in the past, but then ceased due to political instability in the early 1990s, according to Range Resources. The company said it considered Puntland’s current political situation to be stable, following democratic elections in January.

The company said a 1991 World Bank study showed Somalia and Sudan topped the list of eight African nations considered potential commercial oil producers.

“Somalia had been previously identified to possess all the requirements for a petroleum province,” said executive chairman Mike Povey.

“The earliest indication of oil in Somalia was a large oil seep southeast of Berbera and several other seeps in various locations within the country.

“However, early exploration concentrated on an anticlinal structural approach since this had met with success in the Arabian peninsula, but it took the oil companies a number of years to abandon this approach in Somalia.”

Povey said a lack of evidence of large compressive folding in Somalia suggested hydrocarbons should be sought in older structures and stratigraphic traps.

This view was further reinforced in the mid 1980s following the successful exploration efforts of Hunt Oil Corp across the Gulf of Aden in Yemen.

“There Hunt discovered an estimated 1 billion barrel oil reserves that their geologists believed were part of a great underground rift or valley that arced into and across northern Somalia,” said Povey.

“Several major oil companies obtained exploration concessions and conducted considerable exploration and drilling over large parts of the state both onshore and offshore during the late 1980’s and early 90’s. These companies included AGIP, Shell (Pecten), Conoco, Phillips and Amoco.”

Unfortunately for Range, most data relating to previous exploration had been destroyed. But the company said it was able to view and photograph some fragmentary data – mainly old maps – recovered by the Puntland Government.