Somalia readies for oil exploration, still working on petroleum law
The Somali government says it will award exploration licenses to foreign oil companies later this year, despite calls from the opposition to wait until laws and regulations governing the oil sector are in place.
Seismic surveys conducted by two British companies, Soma Oil & Gas and Spectrum Geo, suggest that Somalia has promising oil reserves along the Indian Ocean coast, between the cities of Garad and Kismayo. Total offshore deposits could be as high as 100 billion barrels.
The government says it will accept bids for exploration licenses on November 7, and the winners will be informed immediately. It says production-sharing agreements will be signed on December 9, with the agreements going into effect on January 1, 2020.
“We have presented our wealth and resources to the companies,” Petroleum Minister Abdirashid Mohamed Ahmed told the VOA Somali program Investigative Dossier. “We held a roadshow in London [last week], and we will hold two more in two major cities so that we turn the eyes of the world to contest Somalia.”
But several lawmakers have expressed concern the government is moving too quickly. Last week, the head of the National Resource committee in the Upper House of Parliament accused President Mohamed Abdullahi Mohamed’s government of a “lack of due diligence” and violating the constitution.
Barnaby Pace, an investigator for the NGO Global Witness, which exposes corruption and environmental abuses, says Somalia, after decades of internal conflict, does not have the legal and regulatory framework to handle oil deals and the problems they can cause, such as environmental abuses, corruption, and political fights over revenue.
“There is not a clear consensus about how the oil sector could be managed in Somalia,” he said. “And once Somalia makes deals like the one it’s proposing, it may be locked in for many years and find it difficult to renegotiate or change them to best protect itself.”
Former oil officials speak out
Somalia’s parliament passed a Petroleum Law to govern oil sector in 2008 when the country operated under a transitional charter. But constitutional experts say that law was nullified after a constitution was ratified in 2012.
A proposed new law is now before parliament for debate. The bill says negotiations for oil-related contracts will be the responsibility of the Somali Petroleum Agency, which would not be formed until the law is passed.
Ahmed said government’s timetable for awarding licenses is just “tentative,” though he believes the government can keep to its schedule.
But Somali lawmakers and opposition leaders are worried the government is in a needless rush.
Jamal Kassim Mursal was permanent secretary of the Somali Petroleum Ministry until last month when he resigned.
He says when the government came to power in 2017, the ministry was informed that bids for oil exploration licenses would not be considered until the Petroleum Law was passed and “we are ready with the knowledge and skills.”
Since then, he told VOA, “Nothing has changed — petroleum law is not passed, tax law is not ready, capacity has not changed, institutions have not been built.”
Abdirizak Omar Mohamed is the former petroleum minister who signed the 2013 seismic study agreement with Soma Oil & Gas.
Mohamed said the country needs political consensus and stability before oil drilling. He notes that a resource-sharing agreement between the federal government and Somali federal states has yet to be endorsed by the parliament.
“No company is going to start drilling without agreement with regions,” says Mohamed. “So why rush? It’s not good for the reputation of the country.”
Soma and Spectrum’s advantage
Mursal also objects to an agreement that gives first choice of oil exploration blocks to Soma Oil & Gas, one of the companies that conducted the seismic studies.
According to the agreement, Soma Oil & Gas will choose 12 blocks or 60,000 square kilometers to conduct oil exploration. Among these are two blocks believed to contain large oil reserves near the town of Barawe.
He says the government needs to renegotiate and offer just two blocks instead.
“This is the one that is causing the alarm,” he said. He predicts that if Soma Oil & Gas gets to choose 12 blocks, the company will “flip” some of the blocks to the highest bidder.
In 2015, Soma Oil & Gas was caught up in controversy after allegations of quid pro quo payments to the Somali Ministry of Petroleum. The payments were termed as “capacity building.” The following year, Britain’s Serious Fraud Office closed the case because it could not prove that corruption took place.
Somalia’s current prime minister, Hassan Ali Khaire, was working for Soma Oil & Gas at time. Somali officials say that since taking office, Khaire has “relinquished” his stake in the company, said to be more than 2 million shares.
The other company that conducted seismic surveys, Spectrum, also made payments to the Somali Ministry of Finance, according to Mursal.
Mursal told Investigative Dossier that between 2015 and 2017, Spectrum paid $450,000 every six months to the ministry.
A senior official who previously was involved in the Ministry of Petroleum told VOA that Spectrum paid $1.35 million in all. He said the payment was “consistent,” though, with the advice of the Financial Governance Committee, a body consisting on Somali and donors which gives financial advice to Somalia.
Spectrum has not yet responded to Investigative Dossier requests for an interview.
Current Petroleum Minister Ahmed said the government will do what is best for Somalia, but needs to have a law governing the oil sector in place.
“The parliament has the petroleum law,” he said. “Without it being passed, we can’t touch anything.”