Thursday, October 17, 2013
Somalia's Western-backed government is talking to major international
oil companies like Exxon Mobil, Royal Dutch Shell and BP about resuming
exploration programs abandoned when the East African state collapsed
into anarchy in 1991.On the face of it, that could be an
extraordinarily hard sell since Somalia remains highly volatile despite
recent military setbacks for the Islamist insurgents of al-Shabaab who
are linked to al-Qaida.
What makes it tougher is that Somalia's
neighbors, Kenya in particular, have their eyes on potentially large oil
and gas reserves in disputed waters in the Indian Ocean.
Al-Shabaab
still controls large areas of the Somali countryside and any oil
company that ventures into the country risks getting caught up in sharp
political rivalries between the fragile central government in Mogadishu
and semiautonomous regions like Puntland and the self-declared state of
Somaliland in the north. Both have deals with Western oil juniors.
A
high-profile Sept. 21 attack by al-Shabaab on an upscale shopping mall
in downtown Nairobi, capital of neighboring Kenya, in which at least 67
people were killed points to al-Shabaab widening its terror campaign
across East Africa.
On top of this, the Kenyans, who provided
troops for an African Union military force that drove al-Shabaab out of
Mogadishu and other Somali cities in 2011-12, are trying to set up a
buffer zone in a Somali border region known as Jubaland, the better to
stake a claim on the disputed waters in the Indian Ocean.
"The
world's leading oil companies are increasingly accepting that their
quest for new reserves will take them into challenging new territory,"
analyst Katrina Manson observed.
"In regions such as the Arctic,
the problems are technical. Around the Horn of Africa, companies must
calculate whether political and security risks will put too heavy a
burden on their production costs," she wrote in The Financial Times.
"This
is hazardous territory in which to operate. A chunk of Somalia is still
under the control of al-Shabaab. Its waters are the hunting ground of
pirates, who since 2005 have earned close to $400 million by ransoming
149 vessels."
Despite all this, Abdullah Haidar of Somalia's
Ministry of Natural Resources reported recently that discussions in
London with the major oil companies, including Conoco Phillips, Chevron Corp. and Eni of Italy, "are going well."
These
companies, along with BP and Shell, acquired onshore and offshore
exploration blocks in the 1980s during the military dictatorship of Gen.
Mohamed Siad Barre.
But
when Somali warlords deposed him in 1991, exploration ceased as the
country was torn apart by clan warfare. They declared force majeure.
Now
several, such as Shell and Eni, want their blocks restored and to enter
into production-sharing agreements with the 8-month-old,
donor-dependent government of President Hassan Sheik Mohamed that wants
to use oil to rebuild the impoverished country's ravaged economy.
The
companies are largely tight-lipped about their dealings with Mogadishu,
but ENI said its chief executive met with Mohamed in September. Shell
said talks are currently "of a preliminary and exploratory nature."
But
there is clearly interest because these and other majors have made big
strikes across East Africa, particularly with oil around Uganda's Lake
Albert and gas off Mozambique and Tanzania.
The only Western
company to sign up with Mogadishu so far is the British company Soma Oil
& Gas, established in 2012 and headed by Lord Michel Howard, a
former Conservative Party leader who's held several cabinet posts.
It
signed an agreement Aug. 6 and will conduct seismic surveys in
designated areas on land and offshore, and update historic seismic data
for the government, in return for nominating exploration and drilling
rights for up to 12 blocks.
Somalia's U.N. Monitoring Group
warned in a report to the Security Council in July oil exploration
across the shattered state risks "exacerbating clan divisions and
therefore threatens peace and security. ... Oil companies should cease
and desist negotiations with Somali authorities."
Some oil has
been found in Somaliland and Puntland, which have largely escaped the
violence. But the dozen or so oil companies drilling there have to be
protected by militias or private forces.
"It is alarming that
regional security forces and armed groups may clash to protect and
further Western-backed oil companies' interests," the U.N. warned.