Aug 2007
Part 1: The Dangerous Smell Of Crude Oil That May Ignite A New
Civil War In Somalia
Background
Paul Roberts states in his book, the end of oil, that United States
Geological Survey claims that there are worldwide proven oil reserves of
1.7 trillion barrels, 900 billion barrels of unproven oil and an
estimated 1.5 trillion barrels yet to be found. But the United States
Geological Survey in its 2000 report claims that there are worldwide
proven oil reserves of 3021 billion barrels and 15401 trillion cubic ft
of gas.
With these enormous quantities of oil and gas available in the world
the demand of these strategic products is higher then ever. Also the
price of a barrel of crude oil is not expected to go below $50 in the
next decade and some analysts predict a price of $105 per barrel in the
near future. This is what is making investment in the oil industry
especially in the exploration sector attractive. And contrary to the
intimidations given to the incompetent Somali delegation headed by Mr
Gedi at the Malindi conference of June 2006 by Kuwaiti Energy and Medeco
representatives, investment in oil exploration and production is more
lucrative then ever before as alternative fuels are far from overtaking
Hydrons in the enrergy sector. America is considering extracting nearly
200 billion barrels of oil from oil shale in Colorado and Utah , and
anyone who understands a bit about petroleum can compare the costs
involved and the scarcity of appropriate technology. The cost of
conventional crude oil is about $1 per barrel compared to $10 to $15 per
barrel of oil shale. Similarly Venezuela is negotiating with some major
oil companies to explore and extract oil nearly the size of Saudi's
total proven reserves from its oil sand reserves. This implies that the
demand for oil is inelastic and production of oil from frontline
reserves like Somalia is cheaper and much easier than the oil shale
reserves in the US and oil sand reserves in Canada and Venezuela . And
many companies whether big or small are interested in Somalia .
Somali oil exploration before and after 1991
Reports written by major newspapers including Sharq Alawsat in the
nineties stated that Somalia has estimated oil reserves of over 10bn
barrels and has 200 billion cubic ft of proven gas reserves. Since mid
fifties major oil companies were doing sporadic surveys in the hope of
producing commercial quantities of oil from onshore and offshore
Somalia. The biggest major exploration was carried out in independent
Somalia and the occupied Ogaden in the fifties by western oil companies
such as Sinclair Oil Corporation, Standard oil and the current estimates
are either based on old technology used at the time or estimates made in
the seventies and eighties. In the eighties few major oil companies
showed their interest in Somalia and gained concessions from the last
government of Somalia . ConnocoPhilips, Amoco, Shell, Chevron and Agip
were among these Western Companies and ceased their operations in 1988
and 1990 after declaring force majeure. Range Resources an Australian
oil company which signed an exploration deal with Puntland recently
estimates about 5bn to 10bn barrels of oil in Puntland including Mudug
region.
Concessions to the Western oil companies were not given away easily
and although I do not have the exact details informed sources told me
that at some point the Somali government insisted that oil companies
should train engineers and geologists who will take over exploration,
drilling and management from the oil companies after 20 years. He
included that most of the companies were interested in blocks located
either in Northern or North Eastern Somalia except Amoco, which was
interested in offshore blocks located in the Lower Shabelle and Lower
Juba area. Though negotiations were tough there was only one major
player who was the minister of water and mineral resource from the
Somali side who was consulting with the concerned parties such as the
president and the prime minister and the council of ministers.
After 1990 oil deals became complex and frightening as some warlords
were approached by some of the Western oil companies who wanted to
renegotiate the agreements in exchange of both financial support and
political lobbying. Reliable sources named both Ali Mahdi and Gen. Aidid
and said that both men accepted in principle a deal which suggested a
25% share of the oil revenues for the Somali side, 50% share for the oil
companies and the remaining 25% to cover the costs for a period of 50
years. But after the infamous 1991 fighting between the two men
prevented the signing of any agreement as the security situation
deteriorated.
The dangerous smell of oil engulfed the country´s politics since then
and some warlords increased their involvement. During the reconciliation
conference held in Kenya between 2003 and 2004 new unknown oil companies
get involved in the election campaign of the current interim president
Mr Abdullahi Yusuf. A key member of the president’s campaign team and a
former MP told me that a Chinese company introduced by the current
Energy and Oil minister Mr Abdullahi Yusuf Harare paid $350.000 into the
election campaign in return for concessions and the appointment of the
late Yusuf Harare as the Oil Minister. Both conditions were met by the
president once elected and that is why the young Harare replaced his
father after his death. Also Mr Munye a former MP and the guardian of
Shifco Fishing Company paid $470.000 into the campaign of the president
in exchange of him keeping the ships and requesting the Yemeni president
to supply discounted diesel to Mr Munye and the presidents elder son.
Both demands were met again and good quantities of diesel were sold in
the East African market by the presidents elder son and Mr Munye
supplied by the Yemeni government. The president has fulfilled his
promise but unfortunately selected an oil minister who cannot fulfill
his duties and cannot stand against the evil deeds of the prime minister
and his close friend whom he appointed the director general of the
Energy and Oil ministry. I was not surprised after I read an interview
by MS Sara Akbar of Kuwait Energy, which contradicted drastically with
an interview held by Mr Harare in Australia .
Somaliland signed two different exploration agreements with Zara
Energy and Rova Energy. Both companies are unknown and are owned by
Kuwait Energy and Ophir Energy of South Africa ’s Tokoyo Sexwale
respectively. Puntland granted concessions to Range Resources of
Australia. There is also an agreement signed by the TNG with Total in
2001.
Having understood the importance of oil money in the Somali politics,
the prime minister felt obliged to create his own channel. He appointed
many Energy advisors and sent them to hunt for oil companies. After two
years of extensive search they came up with Kuwaiti Energy and Medeco
Energy of Indonesia . Both companies are not known in the oil circles
and it is not a surprise for me as Mr Gedi is looking for quick money
rather than the benefit of his country and his people. Mr Gedi's energy
advisors are either veterinarians, like his French Chief Political
Advisor, or short sighted new businessmen who had no previous experience
or knowledge in the oil industry. Mr Gedi wants to earn more money from
this deal by getting shares from the proposed Somali Petroleum Authority
and I believe that he is getting 11% as 30% of the revenues are
allocated for the TFG and 10% for the regional governments and 49% for
Kuwait Energy and Medeco. Also Mr Gedi appointed Mr Hussein Ali Ahmed a
fellow tribesman and former TNG mayor of Mogadishu to the post of the
Chairman of the proposed Somali Petroleum Authority. Mr Hussein, though
held a high position in a virtual government, has no knowledge or past
experience in the oil industry. The main reason behind establishing SPA
is that Mr Gedi wants to have direct control of the oil industry and
circumvent totally the ministry and the council of ministers, as the
council should approve all deals otherwise. And this is what he is
planning for the income generating ministries and had in mind since 2005
as a former minister and close friend of Mr Gedi confirmed to me.
Accordingly to the plan all parastals will report directly to the prime
minister and will be headed by either his relatives or his associates
from other clans.
Kuwait Energy does not operate any oil fields and is not capable
financially to execute petroleum exploration and production activities.
Medeco is a failure which is sought after by the Java Province for an
environmental disaster in the range of $1 billion dollars according to
informed sources and other debits in the range of $177.000.000 by its
investors. Kuwait Energy and Medeco drafted a new dubious petroleum law
in which they want to own 49% of a proposed Somali Petroleum Authority.
It is mentioned in this draft law that SPA will have 30% of the
contribution of the profit sharing and the regional governments will get
10%. Who is getting the remaining 60% is kept in the dark. But if we
assume that Kuwait Energy and Medeco are getting 49% of the government’s
share of 30% it means they are getting away with 14.7% of the profits
made out of any barrels produced and exported or sold locally without
investing a dime in the project. What is alarming is, these dwarfs
outsmarted and fooled Mr Gedi by convincing him that they can by law
lead the proposed SPA according to article 8 section 8.5 of the draft
law. What is more sinister is that there are three proposed institutions
in oil sector, which are the ministry, SPA and Somali Petroleum
Corporation. The job descriptions of the ministry and SPA are over
lapping as both organisations are regulatory bodies, which are
responsible for the same duties. According to the draft it seems that
the ministry is standing in the place of a symbolic council of ministers
in a properly run natural government. In reality there is no need for
the SPA as the ministry and SPC can do the job and this takes Kuwait
Energy and Medeco and the 49% they earmarked for themselves from the
equation if executed that way.
Missed Opportunity
There are dozens of trained Somali nationals who are either living in
the country or in the Diaspora but their expertise is neglected and
ruthless ignorant local and foreign so-called consultants were employed.
Some of the Somali experts have information dating back to the fifties
and through knowledge of every agreement signed and every block of land
surveyed and who did the survey. Unfortunately this government is
against knowledge and experience and doesn’t like using the skills of
the Somalis who served their country in the previous governments. The
president and the prime minister are underestimating the manpower of the
country. The same strategy was the practice of the TNG and that is why
it failed and this TFG is dooming itself to the same fate.
Implications
There are four different stakeholders with different agendas and
objectives involved in the oil industry of Somalia , which are:
- The President and the Energy and Oil minister and their
associates
- The Prime minister and the director general of the energy
ministry and their camp
- Puntland and Somaliland and their associates
- Western oil companies who had exploration rights before 1990 and
their governments.
The president and his minister have Chinese companies, which are
bigger international players and signed deals with them. The agreement
gives them exploration rights in a block which is different from the
blocks held by the western oil companies. It also clearly states a
production sharing of 51% for the Somali government and 49% for the
Chinese. The Chinese have good reputation of producing oil from Africa
but they are also known for their cleverness in buying their way into
securing exploration rights. Mr Gedi is concerned, as a bystander, about
not getting a lion’s share of the kickbacks from the Chinese and he felt
that there is no space for him.
The prime minister is looking for a long-term and continuous follow
of money through kickbacks and share holding of small and unknown oil
companies. This is the reason behind the introduction of Kuwait Energy
and Medeco. And that is why he instructed his new found friends to draft
a new oil law, which is overtly favouring the foreign oil crusaders and
him. This new oil law, if adopted by the parliament, threatens the
interests of the president’s camp, the regional governments and the
western oil companies. The draft oil law nullifies all agreements signed
before 30.12.1990 and calls for all former concessions holders to adjust
their previous agreements according to the new law within a year. If
they fail to do so their agreements will be void according the draft.
This threatens the interests of the other stakeholders and will meet
stiff resistance from them. Unlike the president's single block deal it
covers the whole country. And if adopted deprives all rights from
existing holders of exploration rights and paves the way for the
embezzlement of Somalia's natural resources by hoax foreign companies
and the prime minister's camp.
Puntland is trying to gain as much wealth as she can before dust
settles down in the rest of Somalia . She also wants to gain control of
the mineral resources and dictate her terms and conditions to the
federal government when it comes to the sharing of the revenues from oil
and other minerals. In an interview with HornAfrik radio Ade Muse
reitrated his position and said that Puntland is responsible for its
natural resources and has the right to sign contracts with any company
she wants. He also said that they are honoring deals, which they signed
before. But the real problem is that Range Resources is not in a
position to fulfill their part of the contract as it is weak financially
and lacks experience in oil production. Puntland insiders say that a
close relative of Ade Muse is working for the company and that is the
connection between Range Resources and Puntland.
Somaliland has made its intentions clear in 1991 and South Africa is
trying hard to help the region to get independence. Mr Mbeki and his
close associate billionaire Tokoyo Sexwale are at the forefront of this
unsuccessful struggle. In order to involve him deep into the partition
business Somaliland granted exploration rights to Mr Sexwale´s Oil
Company.
Western oil companies had explorations rights in different blocks in
the country and signed agreements with a legitimate government. These
companies declared force majeure in 1988 in the North and 1990 in the
rest of Somalia . The force majeure clause gives them the right to come
back at anytime the security situation permits them to commence their
operations. Agreements with legitimate governments cannot be cancelled
by this transitional government without any concrete preaches from the
oil companies themselves. The US government is also fully supporting the
oil companies and many people in the oil industry believe that oil is
the main reason behind the US involvement in the Somali affairs. The US
is also the main backer of the TFG both politically and financially and
what is happing in the oil industry now is not in its interest. We all
know that the TFG will not last long if it jeopardises the American
interests and the US may create new groups and back them to oppose the
TFG if it feels threatened by the actions of Mr Gedi or Abdullahi Yusuf.
The above mentioned point to a sudden danger that conflict of
interest can create in the political environment of Somalia . The
objectives of the 4 groups can’t be reconciled as each group has its
supporters, some of which are unaware of the situation, in the ground.
The prime minister has the backing of his cousin Mr Mohamed Dheere and
has compiled few millions of dollars from the government funds, which he
solely controls. Mr Gedi thinks that as long as this government is
virtual as it is now he can buy the parliamentary votes required to
adopt his new oil law. He is also counting on the support of the
Ethiopian occupiers who are interested in increasing their grip on the
Somali nation. If Mr Gedi doesn’t get what he wants he is prepared to
block others from achieving their objectives and this can be the impetus
for him becoming a new warlord if he is removed from power. He can also
involve his clansmen who have no love lost between them and Abdullahi
Yusuf.
The president is trying his best to stand against the evil intentions
of Mr Gedi and his foreign collaborators. The only way he can do that is
either to fire Mr Gedi or to buy votes in the parliament. The two
scenarios are interlocked as the termination of Mr Gedi´s job has to be
approved by the parliament according to the charter of the TFG. If the
president loses this battle he may resort to force to gain the war as
happened before in Puntland. If that happens the president is relying on
Puntland and the US who seem to be losing patience with Mr Gedi. This in
turn can ignite a civil war, which is greed created between Gedi and
Abdullahi Yusuf. If this scenario happens Somalia will be back to square
one and long years of civil war may follow.
Recommendations
To avoid disastrous conflict within the TFG and its consequences to
Somalia I believe the following steps have to be taken: ·
- All activities concerning oil law and exploration rights has to
be halted. ·
- All Somali experts in the field has to be recalled from the
Diaspora and their knowledge and expertise has to consulted ·
- Last government's foreign investment and oil laws as well as the
agreements made with the Western oil companies has to be reviewed
and consulted ·
- Oil laws of other African countries such as Nigeria , Sudan ,
Angola and Gabon has to be studied and consulted ·
- Proper research of the current affairs of the worldwide oil
industry has to be carried out ·
- Only Somali nationals and not foreign nationals has to be given
control over all petroleum affairs including drafting of laws and
negotiations of exploration deals. ·
- A competent, effective and efficient person has to be appointed
as the Energy and Oil minister. ·
- The president and the prime minister have to refrain from direct
involvement in the deals and should wait for the proposals and
recommendations of the experts in the industry and the Energy and
Oil ministry
Aden Yabarow
ayabarow@yahoo.com
Part 2 read here.....
SOMALI VERSION... Akhri halkan...
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