Oil explorer Soma Oil to miss deal deadline with Somalia as insolvency beckons

The UK oil explorer Somali Oil and Gas whose dealings with the government of Somalia over an exploration contract in 2013 became subject of investigation by UK authorities is likely to miss out on key agreements with Somalia this week following the company’s economic misfortunes.

In an article by the UK paper the Telegraph, Soma’s quest for a share in Somalia’s oil proceeds is on the rocks as the company failed to secure project financing amid reports financiers have shied away from the company which is currently battling bribery and corruption scandals.

Sources the paper quoted say Soma Oil has failed to secure support from shareholders, a move which could see the oil explorer run into insolvency before end year.

Private equity fund Winter Sky Investment has already invested over £50m in Soma’s project in exchange for a 30pc share of the company before the SFO investigation paralysed the company’s progress and oil prices plummeted from $100 a barrel to around $50 at current market rates, the Telegraph said.

“With the investigation still hanging over them the company faces a very real risk of insolvency,” one city lawyer said.

The company failed to quash the Serious Fraud Office, SFO investigations on the company last week when a court in the UK ruled against a judicial review into the watchdog. As a result, company’s lawyers said the company was on the risk of death.

Soma Oil and Gas misfortunes emerged last year following a report by the UN Monitoring Group for Somalia and Eritrea which indicted the company of bribing senior government officials in Somalia to receive favourable treatment in the award of Seismic Option Agreement and further oil production sharing agreement.

The company however vehemently denied any involvement noting its dealings with the government of Somalia were above board.

The oil explorer submitted the Exploration Programme data to the government of Somalia in December last year and further followed up with a Notice of Application for Production Sharing Agreements (PSAs).

Somalia went ahead in the same month to appoint the US based Spectrum ASA to market the Exploration Programme data.

The concerns over Soma follow the collapse of Nigerian oil explorer Afren, which last year entered administration amid a storm of corruption allegations, mounting debt and the plummeting price of global oil.