Oil Contracts: The deals and companies in Somalia
By T. Roble
In our continuing series on the oil contracts fiasco which in the last one week has resulted in criminal investigations by the UK Serious Fraud Office on the alleged corrupt practices involving the oil company Somal Oil and Gas and the ministry of Petroleum in Somalia, today we take a look at the past and current oil deals in the country.
In late 1980s, Somalia issued oil exploration licenses to a number of international companies notably Shell, Total, Chevron and Conoco. However, few years down the line, a civil war broke out forcing the companies to cease operations and declare the contracts force majeure.
In essence, these companies froze their operations but the contract remained in force maintaining their legal rights over the oil blocks already signed for.
Risk takers or opportunists?
However the ensuing civil war and rise in militancy did not deter other oil companies from finding way to Somalia. Puntland and Somaliland which declared some form of autonomy enjoyed relative peace making them attractive to prospectors.
Kilimanjaro Capital, incorporated in the Central American nation of Belize and known for its high risk ventures secured a 5% stake in Amsas Oil, a company owned by a former Somali diplomat Ali Abdullahi whose acquisition of the block during the Transitional Federal Government tenure was said to be questionable. Kilimanjaro Capital is owned by a Ugandan, Zulfikar Rashid. But then Petroleum Minister Da’ud denied there was any deal with Kilimanjaro Capital.
Oil companies in Somalia
Though complicit in the same illegal practices of cutting oil deals, ministers in the past to date have always claimed the government was not going into any transaction with oil companies until proper legal regime was put in place and agreements with regional administrations reached.
Both the Federal and Regional governments have entered into contracts with present and past oil firms with each raising transparency and legal concerns.
Somaliland
The northern breakaway state of Somaliland, formerly a British protectorate has so far signed 4 oil deals between 2008 and 2013. The Yemeni company Ansan Wikfs acquired three blocks; block 14, 19 and block 7 East after paying a $1.8million fee. Somaliland Energy Minister, Hussein Abdi Duale was quoted as saying the fees would be utilised for various development projects within the areas the blocks are located
Other companies are London-based Genel Energy Plc, RAK Gas LLC, owned by the government of Ras al-Khaimah in the United Arab Emirates, and Oslo-based DNO International ASA. In addition to these, authorities in Hargeisa signed mineral deal with Chinese company Guangzhou Dongsong Energy Group Co Ltd. However locals revolted against the deal forcing the Chinese company out.
Puntland : In 2005, Puntland signed off its first oil exploration contract with Australian company Range Resources and subsequently a Production Sharing Agreement in 2007 with Range Resources and its partner Canmex Minerals subsidiary Canmex Holdings (Bermuda).
Under the terms of both the royalty-based and profit sharing agreement, Canmex , later renamed as Africa Oil would commit to two three-year periods of comprehensive oil exploration in the Nugaal and Dharoor Valley blocks. A 20-year period of exploitation would come into effect in the event of commercial oil yields, with an option to extend the duration an additional 5 years.
But exploration efforts in Shabbeel 1 and Dharoor did not yield any positive results prompting Puntland to sign another contract with US based ION company for offshore oil 2D seismic survey.
Range Resources and Red Emperors are also reported to have expressed interest in offshore drilling.
Well Connected, a group US of citizens and Somali mainly from Puntland based in Delaware USA mooted a plan to set up a $1.5 million refinery in Puntland to produce 100,000 barrels a day but could not raise funds realise this end.
Galmudug :
The US based company, Liberty Petroleum owned by Trent and Lane Franks is the only known oil company to have cut a deal with Galmudug State which was by then headed by Abdi Awale Qeybdid
This prompted Tjalling Wiersman and Ayca Arisoy, advisers at Shell to write warning letters to Liberty because the area was formerly contracted to Shell before 1991.
Another British company LGE Mansoon sought license in Galmudug but the status is unknown.
Federal Government:
In June 2012, Oil minister Abdulkadir Mohamed Diesow wrote to pre-1991 oil companies convincing them to return to Somalia.
Tembo Petroleum also negotiated an oil deal with then President Sheikh Sharif for a block located in Jubbaland.
In 2013, when President Hassan Mohamud came into office, then Petroleum minister Abdirizak appointed legal advisor Canadian J. Jay Parker and deal maker Frenchman Patrick Molliere. This led to the subsequent signing of Soma oil deal with the government. Parker was later instrumental in drafting the Petroleum Law 2008.
President Mohamud himself met Soma Oil managers in London in May 2013 during the London Conference, three months before the signing of the contract. It’s worth noting that the then aide to the president was Mohamed Ibrahim Mokhtar, who is now the Petroleum minister. Mohamed holds a UK passport.
On 6th of August, 2013, the Federal Government signed seismic survey contract with Soma Oil and Gas. The contract is now a matter of investigation by the UK Serious Fraud Office.
A UK commissioned survey in Somalia in 2014 recommended no oil deal should be signed with Federal government without the consent of regional administrations, as this would lead to conflict. The consultant, Adam Smith International further recommended capacity building for ministry officials. It also called for the establishment of an Extractives Technical Advisory Panel consisting of international and national experts, and the provision of long term and significant technical support to Somali institutions engaged in the extractives sector.
The UN Monitoring Group for Somalia and Eritrea further recommended an oil moratorium in Somalia pending establishment of necessary institutions and consultation with regional administrations.
In early 2015 during his visit to Somalia, Turkish President Rajjeb Tayib Erdogan is reported to have asked President Mohamud to consider Turkey National Oil Company (TPAO) for blocks in Jubbaland. Turkey has repeatedly denied any interest in Somalia’s oil industry despite its extensive developmental projects.
Oil companies in contested waters
Norwegian Statoil, French Total, and Anadarko of U.S, have pulled out of oil contract with Kenya over contested waters in the south with Somalia following warnings from Somalia and subsequent maritime case currently at the International Court of Justice.
But Italian ENI remained operating there. In September 2013, President Hassan Sheikh Mohamud met ENI CEO Paoloscaroni in Rome to convince the company to pull out.
In the third part of the Oil Contracts series, we will look at the key people in Somalia who have been involved in oil deals with Soma Oil and Gas and have been adversely mentioned in the UN Monitoring Group for Somalia and Eritrea report.