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Somalia: The Next Oil Superpower

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Somalia: The Next Oil Superpower?

January 15, 2015

With excellent access to shipping lanes and supposedly massive untapped wealth (perhaps as much as 110 billion barrels) it is no surprise that multinational oil companies are intrigued, but responsible investors would be wise to think twice.

Last month, Soma Oil and Gas , a London based energy company, searching for hydrocarbon deposits off the coast of Somalia, announced that it had completed a seismic survey to ascertain the potential for recoverable oil and gas deposits. Although further details have yet to be released, chief executive Rob Sheppard announced that the results were encouraging. However, Somalia, and potential investors, should proceed with caution when considering entering this frontier market.

East African oil exploration, and in Somalia specifically, is not a secret . Energy firms like Royal Dutch Shell and Exxonmobil operated in Somalia before the government collapsedin 1991. But recent gains against the insurgent group al Shabaab in the south and the decrease in piracy off the coast have sparked a regeneration of the industry. The Somali president, riding these positive evolutions, recently stated that the country is “open for business.”

Although recent security developments are encouraging, substantial hurdles still exist. The Heritage Institute recently released “ Oil in Somalia: Adding Fuel to the Fire? ,” by Dominik Balthasar. The paper discusses how the oil industry in Somalia could have a promising future, but it also explores the risks facing Somalia if the development of its petroleum resources is not carefully managed. Balthasar rightly asks, “is Somalia ready for oil?”

The historic challenges that have limited business opportunities in Somalia, domestic insurgency and piracy, have diminished for now, but these threats have not disappeared. Al Shabaab has been largely pushed out of southern Somalia by multinational forces, but has recently proven that it is still able to operate in the north of Kenya . As Kenya flexes to counter al Shabaab in its own country, it could provide an opportunity for al Shabaab to return to its previous strongholds in Somalia. And even as piracy has largely stopped, it is conceivable that al Shabaab or others could see oil tankers as opportunities to resurrect that practice as well.

Beyond these security challenges there may be political disadvantages to developing the hydrocarbon sector in Somalia. Balthasar notes, among other things, that oil will likely exacerbate existing rifts and political tensions. In the context of the recent political turmoil and contentious federalism process, it is clear that any foreign oil companies would face a high degree of political instability and uncertainty. Balthasar also points out that the legal and constitutional conditions in Somalia are ambiguous in determining who can enter or negotiate contracts with oil companies. Without a well-defined regulatory environment for oil and gas resources, federal states, semi-autonomous regions, and the central government could all separately negotiate and enter into conflicting extraction agreements with private companies. The opaque regulatory nature of these resources has already proven problematic in the semi-autonomous regions of Puntland and Somaliland. Even with updated agreements on how to negotiate for and claim oil fields, Puntland and Somaliland have already leveraged their autonomy and granted their own licenses without the central government’s blessing. This is all likely to lead to further turmoil and maybe even conflict over profitable fields and the distribution of revenues.

Somalia is probably not ready for oil development. With excellent access to shipping lanes and supposedly massive untapped wealth (perhaps as much as 110 billion barrels) it is no surprise that multinational oil companies are intrigued, but responsible investors would be wise to think twice. The underlying political instability and security challenges of Somalia will likely inhibit the long term feasibility and profitability of these projects. It could also cause backsliding for the hard fought improvements in Somalia’s government.

 

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The Article above was made in 2015, and now in 2019 it has started it first gear aimed at Somalia's Oil and Gas.

These were the bidding's showed today;

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It seems like the clan based map of Puntland is getting a slap on the face there. :D 

 

 

  • Haha - That was funny. You made me laugh! 1

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"The Heritage Institute recently released “ Oil in Somalia: Adding Fuel to the Fire? ,” by Dominik Balthasar." 

 

By who? Isn't Heritage a Somali think tank? Don't they have an experienced and excellent Somali expert to come up with either the criticism or praise of the oil exploration? Or maybe the idea of putting a foreigner 's name on the paper is still the in thing with Caynte and his ilk. 

Back to the so-called criticism of the article,  he says Somalia 's regulatory framework isn't ready, that can be developed along side exploiting the resources.  Getting oil off the ground and into market will take years, and if the right minds are running the ship,  it can be put in place in time.  He says, could lead to further political instability between federal and states,  read getting the regulatory framework right. He says, Shabab will target tankers, absolute fear mongering.  Development of a nation will be put on hold because of insurgents, no one runs a nation in fear, one might as well leave and turn off the lights,  if that's the case. 

 

Dear the only decent point you could made would have been for you to come from the angle of having good governance and transparent system in place only should Somalia try to exploit it's resources because as is always the case, at this stage,  exploring oil will probably turn out to be a curse and the winners will be what's largely a western oil companies not the people, mostly,  or the country. 

 

Next time,  write a better convincing article, sir.

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It is the Chinese who are producing this oil . THe OLNF had targeted the Chinese and the Malaysian company while coordinating with unknown foreign intelligence many years ago, which  in return immunity and not to be included terrorist groups publicity. After that incident they were allowed to open offices in foreign capitals.

Yet this shows how nations enter agreements to foreign nations and develop their resources. Although the share of the Somali region and its royalties have not agreed yet by Ethiopia yet.

Folks, we are not in 1970/80 or even nineties. We Somalis had passed the stages where small obscure and corrupt brokers somewhere in LOndon or Dubai used to tell us how to do things. Some of us work in the most difficult resource extraction climate and region of the world like oil sands of Alberta where it takes four or five years of work and bring 250,000 barrel a day after the project is finished.

We know how to build things and who to give the contract to build. We do not need shell companies auctioning or advertising our resources. 

The main reason for these moves are probably two:

the first one is Somali ministers and brokers want  to get some badly needed cash and disappear as quick as possible before they reshuffled in the next cabinet.

The second reason is to block genuine and serious players who could get the oil from offshore dealing directly with Somali state . THese players mainly are Chinese , Turkish, American and Malaysian companies who could dig  quickly as they did in Sudan, Angola and Libya.

Do not fool us. A genuine nation can be contracted to explore and extract the resource. You do not need shell companies created to explore and sell the data with the blessing of the Somali state.

When I saw warlord Dahir Calasow on the front raw paid to attend with his hotel and travel expenses, I knew that these guys were selling snake oil. 

 

 

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galbeedi,

I would add one more reason:

To avoid the most pressing issues in Somalia on the land. Constitution being the most fundamental.

Abiy must be envious of Eritrea and Somalia rulers. No constitution, no regions, no elected regional governments, and 300,000 conscripts, in the way. What Farmaajo is missing is that Eritrea today is where Somalia was in the late 70s early 80s where all the seeds for future fracturing was planted, under what seemed a smooth running fast developing shining country.

 

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This is a daydream. The era of oil is almost over. Electric cars are more common by the day and are affordable. No one is willing to invest hard currency in a failed county with no leadership.

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Oil is still important and will remain so for long time to come. The third world has no chance of leap frogging the western industrial system. There may be many Somali engineers working in Artificial intelligence, but can't take that nomad to AI based/controlled technology without going through the 19th and 20th century technologies.

 

If Somalia wants to use the oil, has to be with far away countries. America, Japan, China, Russia. Never with close by countries. Even the Turkish would not be preferred since they have enemies in the area and Somalia is not strong enough to stand solidly with the Turkish and plaugh on.

Here is what Meles Zenawi said about oil in the Ethiopian parliament.

"Oil has been a curse for Ethiopia. Everywhere around the world oil has brought war and instability with it. If I have my way, oil in Ethiopia should stay in the ground until such time that we are strong enough to defend it, we are developed enough to do at least 80% of technical the work ourselves..."

 

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