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| On guard: a pirate on the Galmudug coast. Pirates have earned close to $400m by ransoming 149 vessels since 2007 |
By Katrina Manson
After an absence of more than 30 years, Abdirizak Omar
Mohamed has returned to Somalia,
the country of his birth. Last year he gave up his job as a civil servant in
the housing sector in Canada to take up a position as one of only 10 ministers
in Mogadishu’s new, slimline cabinet.
As minister for natural resources in a dysfunctional country divided by a continuing war,
he has to oversee a bulging portfolio that includes water, agriculture, the
environment and livestock. As if that were not enough, his brief now also
includes hydrocarbons just as Somalia – and east Africa more broadly – has
become one of the most attractive frontiers in oil exploration for leading
companies such as Royal Dutch Shell and ConocoPhillips.
“The president and
I have discussions every day about oil,” says Mr Mohamed in his office that
looks out at the Indian Ocean across the tumbledown city of Mogadishu. Late
last year, Somalia caught the attention of foreign oil companies by announcing
it intended to auction some of 308 newly delineated oil blocks this year.
The world’s leading oil companies are increasingly
accepting that their quest for new reserves will take them into challenging new
territory. 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. This is hazardous territory in which to operate. A chunk of
Somalia is still under the control of al-Shabaab, jihadi militants allied with
al-Qaeda. Its waters are the hunting ground of pirates, who since 2005 have
earned close to $400m by ransoming 149 vessels.
The politics is also messy, internecine and riven by
militias. Oil companies in the race for contracts find themselves unsure
whether the power lies in Mogadishu or in semi-autonomous regions such as
Puntland or self-declared states such as Galmudug. Somaliland to the north,
bordering Djibouti, has declared itself a fully independent republic.
Attempts to carve up oil blocks before the Mogadishu
government even controls the whole national territory are undermining efforts
to bring peace and stability to a state that has been shattered by 22 years of
war and that exports terrorism. The race to lay claim to resources risks
triggering wider conflicts: regional authorities have been hostile to central
government since the 22-year military dictatorship of Siad Barre. When he was
deposed in 1991, warlords carved up the country – and several clan-based
militias still hold sway, sometimes cutting deals with al-Shabaab.
The danger is that the race for oil will feed a
destabilising rivalry between Mogadishu and other regions – some still
influenced by former warlords – just as the international community is
celebrating progress. UK ambassador Matt Baugh says the situation remains
“very, very fragile”. Rival administrations have issued several companies
rights to a clutch of overlapping oil blocks, redrawing the political map of
Somalia in line with their own interests.
On an international level, disagreement between Kenya and
Somalia over their maritime boundary has also created what one diplomat terms a
“triangle of confusion” reaching across 120,000 square kilometres. Kenyan
troops defend the port of Kismayo, south of Mogadishu, notionally in support of
the Mogadishu government, but Somali officials worry Kenya is keener on
securing oil rights.
“The biggest conflicts right now among Somalis are all
about oil rights ... oil is the main player in all of this mess,” says Mohamed
Nur of Dissident Nation, a lobby group. “But it’s also a force that allows all
sides to have bargaining chips and have an equal role in the future of the
nation.”
Indeed, seven months into the job, President Hassan
Sheikh Mohamud has called for a consensus, saying he has not yet signed any oil
deals. He has also called on international oil companies not to cut their own
deals with regional authorities because “that will block their future
engagement in Somalia”.
“Resources should not be used as a pretext for new
conflict,” he told the Financial Times.
It is a short drive from the president’s office to the
well-guarded steps of the resources ministry. From behind the window of his
bulletproof vehicle, Mr Mohamed points out the recent additions to Mogadishu’s
scars: a car bomb here; a suicide attack there. “We should wait until we have
the right laws in place ... we are not ready yet,” he says, before heading home
for a lunch of chips, camel steak, spaghetti and cumin-infused rice. Such a
culinary hotch-potch offers a reminder that the former Italian colony has long
had to contend with foreign influence and interests.
But oil companies are not proving as patient as Mr
Mohamud – or as patient as he would like. A quarter of a century ago, BP,
Chevron, Conoco, Eni and Shell bought oil blocks and started ambitious
exploration programmes. By 1991 they had all put them on ice, declaring force
majeure as civil war took hold. Now several companies want them back.
The Somali government has already started discussions
with two previous concession holders – Eni and Shell – that want to reclaim
their pre-1991 blocks and enter into production sharing agreements, says a
senior government official. He adds that Conoco is also ready to reclaim its
stake and that BP is considering the idea.
While the companies have not presented concrete plans,
oil executives say they are interested in Somalia should force majeure be
lifted.
But hazardous faultlines between competing authorities
are beginning to erupt. In February, PetroQuest Africa, an affiliate of US
exploration company Liberty Petroleum, signed a deal for a block with the
regional government of Galmudug, a self-declared state to the north of
Mogadishu.
The move shows how quickly tensions can be inflamed
because Liberty’s concession overlaps an offshore block also claimed by Shell.
In a letter of April 24, Shell asked the Somali authorities to take action to
safeguard its “exclusive rights” to the block.
Mr Mohamed is quick to defend Shell and the pre-eminence
of his weak, donor-backed Mogadishu government: “Galmudug should not ever offer
any block to any company let alone the Shell block; it should not be signing
contracts ... there’s only one president.”
. . .
In Galmudug itself, they see things differently. The
president there is Abdi Hasan Awale Qeybdiid, a former warlord portrayed in
Black Hawk Down, the film of the disastrous 1993 US mission when Somali
militants downed US helicopters and dragged US corpses through the streets. He
told the FT that he believed his agreement with Liberty was in line with the
new provisional, federal constitution.
“We are not feeling any guilt for this kind of thing,” he
says. “If there is a problem between the government and Galmudug we need to
discuss, including Shell and Liberty and everyone, let them come to court.”
Phoenix-based Lane Franks, president of PetroQuest and
Liberty, co-founded by his brother and US Congressman Trent Franks, suggests
Shell should buy them out if the company wants to avoid stoking violence in
Somalia. “Shell could still maintain its operatorship by compensating PQ with a
modest royalty and reasonable fee to acquire all the PQ rights,” said Mr Franks
in a letter to Shell executives on April 9. “Shell would also avoid potential
rebellion or backlash from the autonomous states [that could reignite] ... at
worst, another civil war.”
Abdillahi Mohamud of the East African Energy Forum,
another lobby group, warns that such frictions show the stakes are high: “If we
see a scramble for petroleum concessions before a political settlement between
the federal states and Mogadishu is reached, we can definitely see a new
conflict.”
In 2005, when Marcus Edwards-Jones, now non-executive
board director of Aim-listed Range Resources, went to Puntland – a
semi-autonomous state of northern Somalia – he took a Ukrainian charter plane
from Yemen, lured by the promise of data left over from when Conoco conducted
surveys there.
“It was a no-go area in those days – humanitarian planes
didn’t even land, they would just drop aid out the back of a plane,” says Mr
Edwards-Jones. Undaunted, he went on to raise $40m from London fund managers to
explore throughout Puntland following an agreement with the government. Range
and its partners have put more than $100m into the zone. In addition to
drilling two wells, they built an airstrip and deployed 250 troops, led by
South African security contractors, to counter al-Shabaab.
Mr Mohamed insists that any contracts signed with Puntland
since 1991 are “null and void”, and ConocoPhillips wrote in 2007 that it had
“not relinquished its rights in Somalia”. But Puntland’s government countered
in February that the Mogadishu government was interfering “illegitimately on
resource exploitation”.
Both Range’s wells were dry, hitting the share price and
making it harder to raise money for the next well. But Mr Edwards-Jones says
the area is so vast he would need to drill 15 wells before he gave up hope. “We
did find traces of hydrocarbons down there; you can miss it by five feet,” he
says.
His group has not been able to touch a more attractive
block, Nugaal, because it lies in a controversial zone. In fact, Puntland draws
its border with Somaliland to accommodate the Nugaal block. “Puntland came up
with this creative imaginary boundary to entice oil and gas companies,” says
Hussein Abdi Dualeh, Somaliland’s energy minister. He himself faces similar
claims from Mogadishu, which says Somaliland has no right to make oil contracts
of its own.
Mr Dualeh says the earlier claims in Somaliland have
lapsed. He has kept up the pressure by bringing in new companies. Two weeks ago
Somaliland signed over a block to Norway’s DNO International. Ophir Energy has
an interest in two blocks that overlap former BP blocks. Genel last year took a
stake in two other onshore blocks – one of which overlaps a former Conoco block
– and is conducting a seismic survey.
“Ninety-five per cent of who has legality is whoever
controls the territory,” says Mr Dualeh of Nugaal. “No oil and gas company in
their right minds would come in willy-nilly and start doing things.”
But the situation is looking even more complex. The area
around Nugaal, Khaatumo, last year declared independence from both Somaliland
and Puntland, highlighting the risk that oil could rupture the country.
Mr Mohamed admits there are fissures. He wants to change
the constitution – crafted at great expense by Somali lawmakers and UN legal
experts – to accommodate an amended version of the 2008 petroleum law, which
stipulates that the central government will determine oil deals. “We want oil
companies to come into the country ... but companies are taking huge risks,
some of them deliberate.”
. . .
Development: A tangle of converging foreign interests
In recent years, foreign involvement in Somalia has been
characterised as part of an effort to combat terrorism.
But now Somalis are quick to identify a new set of
self-interested motives. “Of course it’s all about oil,” says one senior Somali
adviser about Norway’s growing interest in his country.
Norway, whose state oil company Statoil is exploring off
east Africa, has made various commitments to Somalia. Oslo has installed
solar-powered lamps on the streets of Mogadishu and is setting up a special
$30m finance facility.
Last month a Somali parliamentary delegation visited Oslo
to discuss co-operation, development and the management of natural resources.
Most critically, these talks included discussion of a triangle of water
disputed between Kenya and Somalia.
The Somali parliamentarians rejected a 2009 agreement by
the previous transitional government to sign away the triangle to Kenya. That
has raised the political stakes surrounding the status of Jubaland, a proposed
Somali region neighbouring Kenya that would hold sway over the disputed
offshore zone. Diplomats say that Kenya, whose peacekeeping troops guard
Kismayo, the port at the economic heart of Jubaland, is keen to assert
influence there, against the wishes of the new Mogadishu government.
This tension between Somalia and Kenya matters to western
oil interests. Somalia has already warned Statoil, along with Total and Eni,
not to accept any oil concessions offered by Kenya in the disputed triangle.
Oslo lobbied hard for a Norwegian to become UN envoy to
Somalia. That job instead went this month to a diplomat from the UK, which last
week hosted an important conference on Somalia.
The attendees at the conference revealed the range of
interests converging on Somalia. Qatar, for example, is an investor in Shell.
Turkey has led a diplomatic charge for Somalia by setting up an embassy outside
the secure airport compound and delivering prominent support, such as a camp
for displaced people, a technical college and scholarships.
In the cold war, the Soviet Union and the US competed for
influence in Somalia. But the competing forces are now eminently more complex.
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