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The Dangerous Smell Of Crude Oil That May Ignite A New Civil War In Somalia
By Aden Yabarow
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.
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.
There are four different stakeholders with different agendas and objectives involved in the oil industry of Somalia , which are:
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.
To avoid disastrous conflict within the TFG and its consequences to Somalia I believe the following steps have to be taken: ·