International firms warned against signing shoddy oil deals with Somalia

MOGADISHU | Oil and gas giants that might be interested in signing deals with the federal government of Somalia should be extremely cautious, a leading opposition coalition has warned, just days after the country made official bids for seven oil blocks.

A statement issued by Forum for National Parties [FNP], a conglomerate of six opposition parties, warned global oil firms from signing what it called "shoddy" oil deals, adding that Somalis will protect their resources "jealously".

The coalition is led by former Presidents Sharif Sheikh Ahmed and Hassan Sheikh Mohamud, who has been consistently critical of President Mohamed Abdullahi Farmajo, and one of them is likely to face the Somali leader in the upcoming elections.

According to FNP, the current administration might use proceeds from oil deposits to run campaigns, thus depriving Somalis of "much-needed development". Farmajo has announced intentions to defend his seat, but the country is yet to settle on the date and the model to be used for elections.

Although FNP did not provide any tangible evidence relating to possible embezzlement of funds, Somalia auctioned seven oil deposits in May, with authorities insisting that the proceeds will be used to improve infrastructural development in the country.

The opposition team has often accused FGS of failing to negotiate with stakeholders on the sharing of resources generated from selling the oil, and the standoff could dominate the much-awaited dialogue between FGS and federal states.

Abdirashid Mohamed Ahmed, the country's minister for Petroleum and Mineral Resources had announced in May licensing offshore oil blocks from August, adding that companies were at liberty to place their bids until March next year.

“Somalia has achieved significant milestones that will provide predictability, reliability, and transparency to the oil and gas companies and investors who are willing to do business with the Somali government,” Ahmed had said in a statement.

The licensing rounds, he noted, will be done virtually due to the current Coronavirus pandemic that has continued to ravage the country. The seven blocks, he said, are estimated to be among the most prospective areas for hydrocarbon explorations and production in Somalia.

“This roadshow highlights as a landmark moment in the development of Somalia’s natural resources, which will be transformational for the country’s development,” Ahmed said.

The minister insisted that the process would be fair and transparent for everyone taking part in the licensing round, adding that the revenues generated from oil gas explorations will be used “as the catalyst for a new dynamic, renewable and self-sustainable economy”.

“The opportunities for international exploration and development majors are enormous. Somalia is committed to attracting investment and promoting partnership and business in all segments of the oil and gas industry value chain,” said the minister.

“This event is the starting point to allow the Somali Government to better showcase the vision that our country has for our petroleum and gas industry to potential foreign investors,” he added.

Early this year, ExxonMobil and Shell leased some oil blocks after paying $1.7 million and the deal will be finalized when the bidding officially starts. The two companies used to operate in the war-torn nation before the breakout of civil war in 80s.

The oil deposits in question do not cut across the contested territory with Kenya along the Indian Ocean coastline, Ahmed had said, which is subject to deliberations from the International Court of Justice. The two countries will face each other in The Hague from March 2021.

GAROWE ONLINE