These opaque oil deals and ‘friends’ cannot be good for Somalia’s people

By RASNA WARAH

It is estimated that Somalia has as many as 110 billion barrels of oil and gas reserves — about half of what Saudi Arabia has.

So, when British Prime Minister David Cameron convened a conference on Somalia in London in 2012, many believed that Britain’s sudden interest in the war-torn country was motivated by its economic interests, particularly in the area of oil extraction.

When United Nations monitors reported that Somalia had entered into a secret deal with the British oil company Soma Oil & Gas in August 2013, many observers were surprised that President Hassan Sheikh Mohamud would within just the first year of his presidency agree to an oil exploration deal after having earlier expressed fears that the country was too weak to risk entering into such deals.

Watchdog organisations warned that deals between foreign oil companies and the fragile Somali Federal Government, especially in the absence of regulatory frameworks and laws, could fuel divisions and entrench a culture of corruption and that the exploration and exploitation of oil could exacerbate an already tense political situation.

It has now emerged that the deal with Soma Oil was hastily and secretly drafted without the approval of the Somali Parliament. Soma Oil, on the other hand, insists that “broad terms” of the deal have been made public.

UN monitors have revealed that the deal would give the company the right to apply for up to 12 oil licences, covering 60,000 square kilometres.

In May 2015, Bloomberg Business published the contents of the draft production-sharing agreement between Soma Oil & Gas and the Somali government that showed that the government could end up paying up to 90 per cent of its oil revenue to the oil company, a deal that confers abnormally high benefits to the latter.

Barnaby Pace, a campaigner with the watchdog Global Witness, described the agreement as a “terrible deal for the Somali people”.

It is believed that senior politicians and brokers could be illegally benefiting from these contracts by selling the country’s assets for a song in exchange for money.

There is widespread suspicion that oil looms large in Britain’s and other countries’ dealings with the Somali government and that these countries may be willing to overlook or even facilitate corruption in order to preserve their oil interests.

These suspicions were confirmed last week when the UK’s Serious Fraud Office opened an investigation into Soma Oil’s dealings with the Somali Government.

This investigation is not just embarrassing for President Mohamud but also puts into question the integrity of Soma Oil & Gas, which is chaired by the former Conservative Party leader Michael Howard.

The company, through its PR agency FTI Consulting, has dismissed the investigation, claiming that its conduct with the Somali government was “lawful and ethical”.

Interestingly, FTI is the same company which in 2013 was given a contract by the Somali government to “unfreeze” Somali assets abroad. Concerns over the terms of that contract led to the resignation of Somalia’s first female Central Bank governor, Yussur Abrar, who refused to sanction the contract.

Meanwhile, the Somali Government has said that it would continue working with Soma Oil & Gas until the investigations by the Serious Fraud Office are concluded.

As the country prepares for an election in 2016, there are fears that these opaque agreements could sabotage Somalia’s reconstruction efforts. Apart from concerns that Somalia does not have the infrastructure to carry out a credible nationwide poll, there are questions about how the new federal states that the constitution envisages will be constituted.

Regional entities, including the self-governing Somaliland and the newly formed Jubbaland, are already claiming autonomy from the government in Mogadishu.

If you add terrorism and oil-fuelled conflicts to this lethal mix, you have a recipe for disaster. As is happening in South Sudan, Somalia may explode into another conflict before it has even had time to heal.

Talking of South Sudan, given that Salva Kiir and Riek Machar are behaving like spoilt bullies in a school playground, maybe Rebecca Nyadeng De Mabior, the widow of John Garang, can take over the helm of government. She seems to be the only voice of reason in this self-destructive oil-rich country.

Daily Nation