Soma Oil deal above board, small amounts misappropriated, Committee report

By T. Roble

The government has given the Soma Oil agreement deal a clean bill of health rubbishing claims by the UN Monitoring Group that the contract was ridden with misappropriation of funds and that it was crafted as a quid pro quo arrangement.

In a statement released yesterday by the Prime Minister’s office, a committee appointed following the UN report largely vindicated the Ministry of Petroleum noting that most of the transactions were above board.

However, the committee admits ‘small amounts of the funds were used in a manner not conforming to the provisions of the capacity building agreement’.

However Goobjoog News cannot establish the committee’s assertion on how small the amounts were since the findings of the report have not been made public. The committee has however recommended disciplinary action against those involved and the accounting and finances department be re-structured.

UN Monitoring Group 

The UN Monitoring Group for Somalia and Eritrea, UNSEMG in its report tabled before the UN Security council in September cast aspersions on the manner in which the Ministry entered into agreements with the British oil explorer Soma Oil and Gas Holdings.

The statement released yesterday pointed to two key areas notably the Capacity Building Agreement, CBA and the Seismic Option Agreement, SOA which was adversely mentioned by the UN report.

The committee categorically denied the Ministry reached a deal on a ‘quid pro quo’ basis with Soma Oil as indicated by the UN report. Further, the committee said the Ministry acted in good faith by requesting the capacity building arrangement and that there was no favouritism provided by Soma Oil.

The UNSEMG said the CBA arrangements were meant to protect Soma’s contract from the potential negative consequences of a forthcoming review by the Financial Governance Review, FGC, a body chaired by the Federal Minister of Finance and tasked with reviewing government contracts.

Contentious issues

The UN pointed out a number of issues in the CBA. First it noted that six of the 13 consultants under the CBA salary were also drawing salaries as civil servants from the Federal Government. Secondly, despite signing a binding agreement with Soma Oil, an MoU dated November 24, 2014 showed the Ministry went ahead to negotiate a CBA arrangement with the Dubai based Allied Petroleum. The MoU would award Allied Petroleum four blocks in the Jora region (Somali-Kenya border) though the same had already been legally awarded to Soma Oil in May 8, 2014.

Thirdly, in its quid pro quo assertion, the UNSEMG says the Ministry signed a letter dated May 8, 2014 extending the offshore area available to survey (Evaluation Area Extension). ”The Ministry hereby requests that Soma include within its exploration Program (as defined in the SOA) a 2D seismic survey that extends to the JORA blocks as outlined in the attached map. Also JORA blocks will become part of the area in respect of which Soma may serve a Notice of Application for a Production Sharing Agreement pursuant to Article 2.2 of the SOA,” the Petroleum Ministry said in a letter to Soma Oil.

The committee however says it found that the ‘Evaluation Extension Area was not envisaged in the original agreement and that it was not able to find evidence to substantiate this claim and neither side confirmed it’.

Data Room

Under the Seismic Agreement Option, the Ministry had asked and agreed with Soma Oil that the latter funds the construction of a Data Room in Mogadishu to store the findings of the seismic survey. A total of $100,000 was transmitted by Soma to the Ministry’s account at the Central Bank. The UN however noted in its report said it had obtained records the money had been withdrawn as of mid March 2015 and was not able to determine who withdrew the funds or for what purpose.

The Committee has indicated it accounted for all the funds paid by Soma Oil and that the construction of the data room is underway. In an interview last month with Goobjoog News, the current minister of Petroleum Mohamed Ibrahim Muktar confirmed the construction was ongoing and that it would be ready before the end of the year.

A number of issues remain of interest in the committee findings including claims of ghost workers under the CBA and the controversial payments made to the government legal advisor Jay Park by Soma Oil amid conflict of interest.

The committee calls for the implementation of the Petroleum Law through establishment of the Petroleum Corporation, finalizing the draft PSA, Establishing the Somali Petroleum Authority and Finalizing the draft Resource Sharing Agreement between the Federal Government and Member States.