The self-declared state of Somaliland has ambitious plans to regulate its nascent oil sector. However, it is a step that could heighten tensions throughout the Somali-speaking region.
The self-declared state of Somaliland has ambitious plans to
regulate its nascent oil sector. However, it is a step that could heighten
tensions throughout the Somali-speaking region.
Like other East African states such as Tanzania and Kenya with
lucrative new oil discoveries, Somaliland is developing resources laws in
preparation to reap the benefits of expected - although as yet unconfirmed -
petroleum deposits.
But analysts warn that access to oil could bring the question of
autonomy from the internationally recognised state of Somalia to a head. Though
technically still part of Somalia, Somaliland has existed as an unofficial
state since unilaterally declaring independence in 1991.
The question of autonomy remains charged, although an uneasy
status quo and Somalia’s weak central government have allowed Somaliland to
operate more or less independently for over two decades. Access to oil finds,
however, could shift the calculus of the official Somali government in
Mogadishu in favor of quashing the autonomy claim for good.
Internal expectations could also destabilise Somaliland, an
oasis of relative calm since 1993 within the fractious Somali ethnic triangle that
includes Ethiopia and Kenya.
Both countries have large populations of ethnic Somalis, with
whom the state has fraught relations. Ethiopia stands accused of human rights
abuses against its restive Somali citizens in the eastern Ogaden region, while
Kenya is trying to stamp out a fresh wave of attacks by the Somalia-based
terrorist group Al Shabab.
Copies of three June 2014 draft bills seen by the writer address
petroleum regulation and revenue allocation in Somaliland. They show that
Hargeisa, Somaliland’s unofficial capital, is planning to establish a sovereign
wealth fund, and has firmly rejected using Somaliland petroleum to subsidise
fuel for its citizenry. The bills, designed by Norwegian law firm Simonsen Vogt
Wiig, are still being held within the energy ministry and have not been
presented to Cabinet yet.
The reaction of the internationally recognised state of Somalia
to Somaliland’s efforts towards developing its own petroleum legislation has
been muted so far, largely due to infighting that has paralysed the government
in Mogadishu for months.
Instead, Mogadishu has ramped up development of a parallel oil
sector, and has aimed its threats at oil companies.
The Federal Government of Somalia (FGS) in Mogadishu has made it
clear it considers contracts signed with Somaliland void.
In September, it said companies that signed deals with regional
governments were "adding fire to conflicts" and “destroying the
international community's effort to build the peace and the security of the
country”.
It singled out Norwegian oil explorer DNO International, which
signed a production sharing agreement with Somaliland in April 2013, and
threatened to lodge a complaint with the United Nations Security Council.
Somalia expects to finish a seismic study of the country by the
end of this year, in order to start a licensing round next year. The FSG hopes
to be producing hydrocarbons offshore by 2020 from a total national reserve
that’s estimated to be as high as 110 billion barrels of oil - a figure
equivalent to Kuwaiti oil reserves.
The FGS is also talking to oil companies about reviving
concessions abandoned under force majeure in 1991, when the country
disintegrated into civil war following the ouster of dictator Siad Barre.
However, Africa Oil’s thwarted attempts to explore a concession
partially in Somaliland, yet awarded by the Puntland government, indicate the
challenges Mogadishu faces if it wishes to enforce Chevron's or ConocoPhilips’
old concessions granted in the same area.
“Somaliland has already concessioned out those areas...If
Mogadishu moves actively to grant a concession, a new concession, in territory
that is in Somaliland - that will be a really robust signal from them of
intent," Chatham House fellow Jason Mosely explains.
In October, the UN Monitoring Group on Somalia and Eritrea
warned of security risks from rival claims over oil licences, unless the
competing authorities create a joint approach to resources management.
Yet Somaliland’s foreign minister Mohamed Bihi claimed in a July
interview with the author that oil had not come up in the Turkey-sponsored
talks between Somalia and Somaliland, indicating that dialogue between the two
countries on the issue could be moving more slowly than developments on the
ground.
Internal frictions
If oil management is being marked as a source of future conflict
between regional Somali authorities, several internal controversies already
flaring within Somaliland indicate how divisive the topic could be on a larger
scale.
Public opposition to a perceived lack of transparency and
participation in Somaliland’s oil sector is building as disputes over land use,
alleged oil payments and local employment have tainted the sector since its
inception two years ago.
In 2013, Anglo-Turkish explorer Genel Energy suspended its operations
citing security concerns, after problems with a local community escalated.
Oil is also feeding the cause of separatist a movement Khaatumo
state. The group claims territory in Somaliland and Ethiopia and is agitating
to become an autonomous state under the FGS, and sees the oil blocks within its
territory as potential bargaining chips.
According to Mr Mosely, although the movement’s roots precede
Somaliland’s oil finds “it would be accurate to say that oil certainly did not
make anything any easier”.
From the perspective of the separatists, Hargeisa’s lack of
grassroots consultation on oil exploration deals is compounding a view that the
distant capital has no right to claim the region's resources wealth, let alone
govern over Khaatumo-claimed land.
And the Somaliland government’s refusal to submit the four
already-signed production sharing agreements for Parliamentary approval is
exacerbating friction with the legislature.
"In the absence of transparency, alternative scenarios come
into being and anyone who fails to be transparent is obviously hiding
something," Ibrahim Jama, an MP from the eastern Sanaag region, says.
He claims the constitution requires all international agreements
to be scrutinised by Parliament, a detail energy minister Hussein Abdi Dualeh
disagrees with. Mr Dualeh claims responsibility for resources is vested in the
state, so it is up to the government to decide how to manage them.
"We do not want to have a food fight over who owns what,”
he says.
Aggravating these problems will be the Somaliland government's
limited ability to implement the ambitious laws it has drafted. The possible
outcome could be continuing public disputes between separatists, diaspora
activists and the government, and the growing mistrust of grassroots communities
residing in Somaliland’s oil rich eastern territories.
Dominik Balthazar, a fellow at the United States Institute for
Peace (USIP), doubts whether Somaliland has the bureaucratic capacity to
implement the proposals, or the economic size to resist over-focusing on
hydrocarbons, causing other sectors to wither.
"It is not necessarily the question of whether Somaliland
can establish such institutions, it has proven in the past that it can,"
he says."[But it is] currently not in the best of positions to bear the
political and economic shocks the commercial production of hydrocarbons is
likely to be accompanied with."
Oil finds have heightened the stakes in the Somali region, with
possible destabilising consequences if the issue is not addressed head on. Mr
Mosely argues that Somaliland and the government in Mogadishu must cut a deal
not only to clarify basics like concession ownership, but to prevent violent
clashes between regional authorities and private actors.
“Eventually you have got to deal with the fact that none of the
entities...are really competent jurisdictions to grant concessions in an
international sense,” he says.
“Somaliland does not exist, internationally… and [the government
in Mogadishu] is the sovereign entity for which responsibility to grant these
concessions, in international law terms, rests.”
