The two coastal nations disagree over the location of their boundary line in the Indian Ocean. At stake are their legal claims to sell rights for exploration and collect revenue from any discovery.

Kenya recently identified eight new offshore exploration blocks available for licensing, and all but one of them are located in the contested area.

The issue between Somalia and Kenya is not a dispute; it is a territorial argument that came after oil and gas companies became interested in the region," Abdullahi Haji, Somalia's minister of foreign affairs, told Reuters in Mogadishu.

"If the argument continues unsolved, it will change into a dispute that may result at least in souring the deep relation between our two countries and (cause a) war at last," he said.

East Africa has become a hot spot for oil and gas exploration, spurred by new finds in waters off countries including Uganda, Tanzania and Mozambique. In the Horn of Africa, Somalia's semi-autonomous Puntland and Somaliland regions have also licensed exploration blocks.

Kenya announced its first oil discovery in March by British oil firm Tullow Plc, which was on land.

The row between Kenya and Somalia threatens to upend some exploration rights that Kenya has granted to oil and gas companies, which have already started exploring in the area.

French firm Total and Texas-based Anadarko and the only two companies so far holding licenses from Kenya to blocks in the disputed area. They have no immediate plans to drill there. Both companies declined to comment on the border issue.

UN INTERVENTION?

Martin Heya, Kenya's petroleum commissioner, said he was confident the United Nations, which could be requested to help delineate the border, would agree with his country's view, and he expected companies to continue their exploration activities.

"Do you stop working just because the boundaries have not been determined? No," he told Reuters.

Consultants involved in border demarcation said the two countries won't have a legitimate boundary until they sign a treaty that delimits the border, but that is unlikely to happen until Somalia has a stable government.

Heya says the maritime border between the two countries should run horizontally east from the point at which the two countries touch on land. The practice in east Africa has been for boundaries to run along the line of latitude, Heya said.

"For the time being, this is where we believe the border should be," he said, referring to the horizontal east-west maritime border.

 into the ocean diagonally southeast and that a horizontal border would be unfair.

If the Somalia-Kenya border was continuous from land into the ocean, making it lie diagonally from the northwest to the southeast, Kenya would be left with a small triangle in the Indian Ocean over which it could claim mineral rights.

Kenya has had stable diplomatic relations with its war-torn neighbor, but the east African economic powerhouse sent troops into Somalia last October in pursuit of al Qaeda-linked al Shabaab rebels, accusing the militants of cross-border attacks on its territory.

UNSTABLE SOMALIA

Joshua Brien, a legal adviser with the Commonwealth Secretariat, who has consulted with Kenya on maritime border matters, said the two countries won't have a legitimate boundary until they write and sign a treaty.

The absence of a stable government in Somalia could hinder this process, he said.

Somalia's government has been battling an insurgency by al Qaeda-linked rebels for years and barely controls the capital, even with the help of an African peace-keeping force executing a U.N. mandate to prop up its Western-backed government. It is unlikely it would have the ability to wage a war on Kenya.

Brien also said the two countries' border disagreement is not unique. Throughout the world there are unresolved maritime boundaries.

"It is not uncommon for maritime boundary issues to become heated, especially where petroleum exploration and development is concerned," he said.

"In the case of Somalia, the matter is exacerbated by the governance and offshore security situation in that country, both of which are well known."

Kenya is pushing on with oil and gas exploration, but petroleum commissioner Heya acknowledged the border dispute could cause problems in the future.

Heya said companies will be unable to drill in their respective blocks until the boundary is settled, because it will be unclear where to direct revenue from a resource discovery."Where the revenue goes is not apparent," Heya said.

Source Reuters