Destabilization fears over Somalia's first oil deal

Sept. 6, 2013 at 1:06 PM   |   0 comments

MOGADISHU, Somalia, Sept. 6 (UPI) -- There are growing concerns that a groundbreaking oil exploration contract between the Western-backed transitional government of war-torn Somalia and a British-registered company could further destabilize the East African country.

East Africa is experiencing a major oil and natural gas boom that will transform the economies of a half dozen states on Africa's Indian Ocean coast, so the prospects of striking oil in Somalia are rated highly.

But, as U.N. investigators warned this year, the worry is that oil exploration across the shattered state, torn by clan wars and Islamist insurgency since 1991, risks "exacerbating clan divisions and therefore threaten peace and security."

"Oil companies should cease and desist negotiations with Somali authorities," the U.N. Monitoring Group cautioned the U.N. Security Council in July.

Soma Oil and Gas Exploration, headed by Lord Michael Howard, a former leader of Britain's ruling Conservative Party, signed Somalia's first deal with an international oil company, albeit an untested one, Aug. 6. The agreement gives Soma, formed in July, the right to apply for as many as 12 oil blocks in an area the Financial Times says oil majors consider "one of the final frontiers for the commodity."

Soma is expected shortly to launch a seismic survey of onshore and offshore locations.

The signing in Mogadishu, Somalia's war-scarred capital, took place as the country appears headed for a new round of violence, as the Islamist al-Shabaab organization, with links with al-Qaida, was showing signs of reviving a long-running insurgency after a series of military setbacks in 2011-2012.

It's not clear yet why the government of President Hassan Sheikh Mohamud, installed only a few months ago with Western and United Nations backing, went ahead with the exploration deal since it had earlier voiced fears that the country was too fragile to risk an oil race.

But the government, which many observers suspect will turn out to be as corrupt as previous Somali administrations since 2006, appears to have been persuaded to change tack.

Abdirizak Omar Mohamed, Somalia's minister for natural resources, told the Financial Times Lord Howard's status and high profile -- he was Britain's home secretary, or interior minister, in 1993-97 and leader of the Conservatives in 2003-05 -- had a lot to do with the Mogadishu government's switch.

Howard argued allowing oil exploration would increase stability by boosting state revenue for a government that's totally dependent on foreign handouts.

"We realized we had to take a different approach," Abdirizak said.

The British have been pushing for oil exploration for some time, along with Turkey, Norway, Qatar and others seeking to drill in Somalia and its waters in the Indian Ocean.

London has succeeded in edging out key competitors like Norway, while prospects in Somalia grew as major strikes have been made further south in the past few years -- mostly offshore, mainly off Mozambique and Tanzania -- in geological strata that appear to extend along the whole Indian Ocean coastline.

The Soma deal has made waves in the oil industry, which had expected a public licensing round for the oil blocks.

Some majors, like Anglo-Dutch Shell and France's Total -- which had signed up for blocks during the 1980s but never proceeded with them because Somalia collapsed into perpetual warfare following the ouster of dictator Mohammed Siad Barre in 1991 -- have put them on ice until "conditions allow."

Some oil has been found in the breakaway semi-autonomous regions of Somaliland and Puntland in northern Somalia. This has encouraged expectations that strikes can be made in other regions, and possibly in neighboring Ethiopia as well.

Somaliland and Puntland have largely escaped the violence that has torn Somalia apart, but the dozen or so oil companies drilling there have to be protected by militias or private forces.

In some cases, exploration blocks awarded by the two regions overlap, as with Norway's DNO and the Canadian-listed Africa Oil Corp.

"Potentially, it means that exploration and operations in these blocks, conducted by both DNO and Africa Oil under the protection of regional security forces, allied militia or private forces, could generate new conflict between Somaliland and Puntland," the U.N. report warned. "It is alarming that regional security forces and armed groups may clash to protect and further Western-backed oil companies' interests."

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