Suspect oil deals are sure to add fuel to the fire that is ravaging Somalia
What you need to know:
- Lack of oversight and transparency are also likely to fuel conflict as competing forces seek to control the lucrative, but highly opaque, sector.
- There is suspicion that Britain’s involvement in Somalia, through Soma Oil and Gas, for instance, may not be completely altruistic and that the prospect of oil looms large in its dealings with the Somali Government.
- Oil has derailed state-building process in several countries such as Iraq and Nigeria, and even exacerbated conflict. Instead of entering into hasty deals with oil companies, the Somali Government should focus on state — and institution — building.
With a weak and unstable government in Mogadishu and few regulatory systems and institutions in place, is it wise for Somalia to enter into oil deals with foreign companies? Will the exploration and exploitation of oil exacerbate an already tense political situation characterised by in-fighting and terrorist threats?
Will oil be the source of renewed conflict in an already troubled region?
These are some of the questions that Somalia’s Federal Government should have been asking before it participated in a forum on oil and gas mining in London last week that was sponsored by, among others, Soma Oil and Gas, a British company which, according to United Nations monitors, has already entered into a deal with the government of Somalia, the details of which have not been made public.
Apparently, the Somali Government has also held talks with Shell, Exxon, Mobil Corp, and BP to revive pre-1991 oil contracts that were put on hold when civil war broke out and the government of Siad Barre collapsed.
Recently, concerns about secret oil contracts between the Somali Government and foreign companies eager to tap the country’s vast oil reserves have escalated. Many observers believe that it is highly irresponsible of the government to enter into deals that may ignite further divisions and civil strife in the oil-producing regions of the country, especially in the absence of legislative and regulatory provisions.
A paper published by the Heritage Institute of Policy Studies last year concluded that it was still too early for Somalia to be venturing into the oil industry as it faces a host of challenges and obstacles that need to be addressed before any viable oil exploration and production can start.
These challenges and obstacles include scant infrastructure for the transporting and processing of oil, political volatility, institutional fragility, physical insecurity, and ambiguous property rights. If not handled with caution, warns the report, Somalia’s oil could prove to be a curse.
LACK OF OVERSIGHT AND TRANSPARENCY
Given that high-level corruption continues to be rife in Somalia and in light of the country’s fledgling State institutions, the absence of checks and balances as well as nascent democratic structures, the hydrocarbon sector’s economic spoils are likely to also spoil politics, says the report’s author, Dominik Balthasar. Lack of oversight and transparency are also likely to fuel conflict as competing forces seek to control the lucrative, but highly opaque, sector.
As the country prepares for an election in 2016, there are fears that the secret contracts between the Somali Government and foreign oil companies could sabotage Somalia’s institution-building efforts. The international community has pledged to rebuild the country’s financial institutions, but it has been silent about the controversial oil contracts that favour companies based in key donor countries.
There is suspicion that Britain’s involvement in Somalia, through Soma Oil and Gas, for instance, may not be completely altruistic and that the prospect of oil looms large in its dealings with the Somali Government.
Meanwhile, regional states, such as the breakaway Somaliland and the semi-autonomous Puntland, have been granting licences to oil companies without any reference to the central government in Mogadishu. Already, competition over an oil block that stretches across Somaliland and Puntland has increased tensions in these regions.
According to Balthasar, these tensions indicate that in the absence of agreed-upon legal frameworks, the oil factor is likely to be a source of conflict in Somalia’s oil-producing regions in the near future.
Somalia cannot afford more conflict at this critical stage of its recovery. President Hassan Sheikh Mohamud’s government should not turn oil into another resource over which clans and regions fight. Donor countries, instead of discouraging these oil deals, appear to be condoning and participating in them.
Oil has derailed state-building process in several countries such as Iraq and Nigeria, and even exacerbated conflict. Instead of entering into hasty deals with oil companies, the Somali Government should focus on state — and institution — building.
Without a viable state and institutions, it is likely that revenue from oil will end up in the personal accounts of individuals and will, therefore, not be used to build the country, which is reeling from two decades of under-development and anarchy.
