Monday, March 30, 2020

Somalia’s Oil and Gas: A recipe for corruption that could trigger renewed conflict in Somalia

Must Read

President Trump impeachment articles delivered to Senate for trial

The articles of impeachment charging US President Donald Trump with abuse of power and obstruction of Congress were delivered...

US soldier killed in Kenya is identified after Alshabab attack that left 3 Americans dead

 A U.S. Army specialist killed with two other Americans in an attack Sunday by al-Qaida-aligned militants in...

3 Americans killed in Al-Shabab attack at Kenyan military base

One U.S. service member and two American Department of Defense contractors were killed in a terror attack...
- Advertisement -

Since March this year, the Minister for Petroleum and Minerals of the federal government of Somalia has been shuttling from city to city in Europe and North America to convince potential oil exploration companies to invest in Somalia’s untapped oil and gas sector and asking them to participate in the bid rounds on offshore blocks with high prospects.

The Minister held the first licensing round in London on February 7, 2019, before the petroleum bill was even debated in the parliament, a clear dereliction of his ministerial responsibility. This was followed by another license round in Turkey, in the USA and in South Africa. 

A recipe for corruption! Yes, indeed article 20 (3) of the recently passed petroleum bill by the people’s house (not yet ratified by the upper house) explicitly states the Somali Petroleum Authority has the prerogative to negotiate and offer blocks directly with potential oil companies without going through the open, transparent licensing rounds; to vouch for yourself (please see the petroleum bill on Somali parliament website).

- Advertisement -

With that, it is pertinent to put forth few caveats for foreign oil companies that are interested in investing in oil and gas sector in Somalia:

First caveat; the Somali Prime Minister was employed by SOMA-OIL and had 2,000,000.0 shares with SOMA-OIL and gas company, though he claims to have relinquished his shares after being appointed to the Premiership position, sources have confirmed for me that the shares were transferred to his cousin and business partner. Who has travelled to Moscow more than five times in the last two years and was recently (two months ago) spotted attending energy conference in Moscow representing the interest of the Prime Minister.

It is now an open secret that the Minister of Petroleum and Minerals for the federal government of Somalia has been telling close friends that SOMA-OIL l will be offered two blocks with good prospects in Hobyo basin as per the instructions of the Prime Minister

- Advertisement -

Second caveat; Notwithstanding, the marketing campaign by the Minister of Petroleum and Minerals, the regulatory framework for petroleum regime is not yet in place as the petroleum bill is yet to be ratified by upper house, the niceties of competitive PSA model is just a plot to hoodwink potential oil and gas investors.

Third caveat; The current mandate of the government is coming to an end in 2020, the current administration is working hard to offer as many blocks as possible and use the signature bonuses they collect for their re-election bid (an unlikely scenario). Foreign oil investors must take into account that not only the stability of the markets matters but the stability of the government is equally more important. Moreover, any hastily signed agreement without a regulatory framework and with a government that is running out of its mandate, will be subjected to challenges by the next elected government in 2020/21.

Fourth caveat; There is pervasive insecurity throughout the country and Al-Shabab poses an existential threat to the federal government and African Union forces. Despite American airstrikes, Al-Shabab is more potent and deadly in terms of its suicide operation, and by using improvised explosive devices (IED) and ambushing AMISOM and Somali security forces. Al-Shabab collects taxes from Mogadishu port, levies sales taxes on properties and business in major urban cities including Mogadishu. 

With such insecurity, any investment in oil and gas sector in Somalia is a very risky undertaking and is critically important to consider the above caveats. The Prime Minister is now scheduled to go to the USA to convince oil companies to invest in Somalia’s untapped oil reserves. My advice to the unsuspecting potential oil and gas investors is to reflect on the above facts before making any hasty decisions on investing in Somalia’s oil and gas sector


by: Ismail D. Osman
A political analyst with a special interest in the horn of Africa.

- Advertisement -

Latest News

President Trump impeachment articles delivered to Senate for trial

The articles of impeachment charging US President Donald Trump with abuse of power and obstruction of Congress were delivered...

US soldier killed in Kenya is identified after Alshabab attack that left 3 Americans dead

 A U.S. Army specialist killed with two other Americans in an attack Sunday by al-Qaida-aligned militants in Kenya has been identified by...

3 Americans killed in Al-Shabab attack at Kenyan military base

One U.S. service member and two American Department of Defense contractors were killed in a terror attack on a military base in Kenya that...

Al-Shabaab jihadists attack US-Kenya military base

 Jihadists from Somalia's Al-Shabaab group on Sunday attacked a military base used by US and Kenyan forces in Kenya's coastal Lamu region,...

Somalia: Spare the civilians, Red Cross and Red Crescent tell warring parties

Mogadishu (ICRC) – The International Committee of the Red Cross (ICRC) and the Somali Red Crescent Society (SRCS) call on all armed...

MORE NEWS

FEATURED

UAE’s Mohammed bin Zayed ordered the attack that killed 90 in Somalia..

A major terrorist attack hit Somalia yesterday, right at a time when Turkey is preparing for a military operation in Libya,...

Becoming Chinese’: Meet the first Somali in the world to “become Chinese”

NO MORE NORMAL I was born in Mogadishu in 1968 and my father is an optologist, who trained in Italy. Back then Somalia...

Could Somalia become the next Texas?

The story of Somalia is being rewritten, and Texas’s oil boom of the early 20th century is a good marker for...

Somali wrongly convicted in Alpi case gets 3 mn euros

A Somali man wrongfully convicted in the Mogadishu murder of RAI reporter Ilaria Alpi and her cameraman Milan Hrovatin on Friday got three million...