17 October, 2012

Who will benefit from Somalia's oil

Who will benefit from Somalia's oil

By: Mahad Farah

Somalilandsun- August 2012 saw Somalia's first parliament since 1991 inaugurate in Mogadishu, bringing the war torn country one step closer to pivotal change. With its newly elected parliament, potential for change has never been higher. This change is assisted by Somalia's vast oil reserve which is promising for the world's 6th poorest country and it has predictably caught the attention of the international community who are all contending to assert their diplomatic presence in Somalia. It is no secret Somalia's natural resources have been eyed by the international community for a long time. In fact the first ever oil well was drilled in British Somaliland in 1912 before World War 1.

This was unfortunately an unsuccessful operation due to the lack of technology which left the Colonial Brits disappointed and disinterested, ultimately leading to consequential independence of British Somaliland several years later. This is quite ironic since Britain is once again leading the dash to explore Somalia's oil. Canadian company African Oil estimated that '4bn barrels (about $500bn worth at today's prices) are allocated in the two drilling plots in Putland Somalia. Other surveys indicate that Puntland province alone has the potential to yield 10bn barrels, placing it among the top 20 countries holding oil. Somalia's This is nothing in comparison to Somalia's offshore, as its estimated to holds more than 110bn barrels of oil which accordingly makes Somalia the 7th largest oil rich nation in the world. This brings fresh questions to whether the oil deals will benefit the Somali people or whether Somalia will go down Nigeria's root of mainly benefiting the statesmen and oil companies. This discovery could very well trigger a momentous push to a lasting solution to Somalia's problem, in that Somalia could find stability through wealth but it could as easily lead to more mayhem.

The logical assumption would be that Somalia's control over the 7th largest oil would surely meet the needs and improve the lives of its 10 million citizens. However this might not be the case; if we take into consideration the long and extensive history of governmental violations as Somali politicians have long been involved in filling their pockets with capital, mainly from foreign aid. The UN has said that $7 out of every $10 of international aid ended up lining some power brokers pocket. The consequence is that 70% of money donated never made it into public coffers in 2009 and 2010. The chance that oil revenues will change the unofficial motto of "What's in it for me?" is doubtful. The new parliamentary speaker being Mohammed Sheikh Osman Jawar an Islamist lawyer who was a minster under the dictator Mohammed Said Barre in the 1980's isn't reassuring either. A minister for a regime that allocated two-thirds of Somalia's oil to American Oil giants, Conoco, Amoco, Chevron and Phillips in its final years. Although internal corruption concerns may still be apparent, the newly elected government has a different a leadership culture, than the last UN backed care taker government. What's more concerning is the fact that it's chock-a-blocked with foreign involvement. The international community set out the framework for the new Somali government in the London conference 2012. Furthermore, Somalia's new constitution was funded by the UN development program and advised upon by Max Planck institution in Germany. In addition there are 18, 000 African Union (AU) troops accompanied by the CIA currently present in Somalia. It is naïve to believe that there's nothing in it for them. True colours have recently been highlighted through the pressure put on the newly oppointed government to only honour oil contracts signed prior to 1991 with oil majors including Royal Dutch Shell , BP and Chevron.

Foreign multinationals are not innocent in fuelling this internal corruption in order to achieve cooperate interest. They achieve this through under table deals in which Somali officials sign away rights to Somalia's resources for their own personal gain, rather than for the national interest. This has been evident in the oil contract signed in 2005 by the Puntland government with Range Resources whereby the Australian company (which at the time was a mining company) was sold all mineral rights in Puntland covering an area of 212,000 sq.km after giving the Putland government a modest bonus. It was the first time ever that regional or federal government has sold off all its petroleum rights to a single company in the world. Not only did they sell all the rights to one company, they sold it far less then market value. Exploitation of Somalia corruption is once again illustrated in the secret agreement in 2009 between Somalia's Omar Shamarka and Kenya signed a secret agreement to give Somalia continental shelf for free. This was later abolished after the information was leaked and caused public outrage, but Kenya is stealing Somalia's offshore oil illigally and have recently tried to sell Somali oil blocks, an attempt rejected by oil companies. On the subject of Somalia's offshore, Kenya, NATO and the UN are pressuring the government to reduce its 400km of offshore to just 40km, a process which will give them free-rein to Somalia's resources and legalize the illegal toxic dumping and illegal fishing that is going on right now.

Injustice is further demonstrated in Somalia's National Oil Law of 2007, which by the way was written by a consortium of Canadian lawyers and Kuwait on behalf of Somalia, vastly underestimates the predicted reserves and allots some of the smallest royalties and profit sharing in the petroleum world. No other country would stand for it as it will be a massive setback to the national interest and a new acceptable national oil law that gives a fair share to the country and protects national sovereignty needs to be produced before any further oil deals are made. If negotiation are held justly and wealth is distributed fairly and morally, Somalia's living standard, health care and education sector will most definitely soar, renovating the 6th poorest country in the world with the GDP per capita of only $600 to a well-heeled, prosperous nation. However this will not be achieved with the way things are heading.

Somalia's oil crosses boarders into the internationally unrecognized Somaliland, who proclaimed independence from Somalia in 1991. Australian Oil Company Jacka Resources and London-list Ophir Energy are among the oil companies to sign exploration agreements with Somaliland. This process is not going to be black and white, as Somalia's oil law 2007 gives Somalia 50% percent ownership of Somaliland's oil. Bare-in-mind that oil companies are already entitled to a large percent ownership of oil found due to Somalia's Oil Law 2007, leaving Somaliland who already loses out on foreign aid to Somalia as it's not eligible because of it's unrecognized status with very little. Unless negotiations are fairly held, satisfying the needs of both countries, no-one will benefit. Pressure also needs to be placed on politicians and oil companies to justly distribute the wealth and ensure that bribery doesn't occur through secret agreements by making oil deals public. Somalia needs to enforce and strength there ocean and coastal laws and the international community needs to start respecting and applying by them. Public interest should be a priority to ovoid similar outcomes in Nigeria, who despite being the 14th world largest oil producer, large proportion of the civilians still live in slums and huts. Awareness needs to be made; otherwise Somalia's internal issues and desperation for change will be exploited and used against in an industry it's never been in before. Who benefits, only time will tell.

Mahad Farah is a law student/blogger.



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