Somalia passed a petroleum sector law on May 20, paving the way for exploration in its waters that could potentially transform the troubled country’s economy if hydrocarbon riches are found.

The new legislation allows for the creation of institutions to oversee the sector and for revenue sharing between the central government and federal states, among other objectives, the ministry of petroleum and mineral resources said in a statement.

“This is a landmark in the development of Somalia’s natural resources, which will be transformational for the country’s development,” the ministry said in the statement.

Hydrocarbon discoveries in Uganda and Kenya and huge gas finds in Mozambique and Tanzania have fanned investor interest in east Africa’s hydrocarbons potential.

Somalia has been mired in insecurity and lawlessness since the toppling of dictator Mohamed Siad Barre in the early 1990s.

However, early this year Somalia began preliminary preparations for a licensing round for 15 exploration blocks covering a total of 75,000 sq km, according to the statement.

“With the passage of the petroleum law it is anticipated that PSAs [production-sharing agreements] will subsequently be signed, which will enable exploration activity to then commence," the statement said.

Somalia is currently battling a threat from Islamist group al Shabaab which frequently carries out bombings in the capital Mogadishu and other parts of the country.

Al Shabaab wants to overthrow the central government and establish its own rule in the country, based on its strict interpretation of Islamic sharia law.