My article on Puntland Oil Exploration

[Armchair Politician]

http://en.wikipedia.org/wiki/Oil_Exploration_in_Puntland

 

Key Players

 

* Africa Oil Corp. formerly Canmex Minerals, an oil and mineral mining company based out of Vancouver, British Columbia Canada.

* Range Resources an oil and mineral exploration company based in Perth, Western Australia and Melbourne, New South Wales, Australia

* Puntland State government of Somalia, where the Nogal and Dharoor blocks are located.

* Transitional Government of Somalia

 

[edit] Consort Private Gets Rights in Puntland

Dharoor and Nogal Blocks

Dharoor and Nogal Blocks

 

Consort Private Ltd., a holding company operated by two Australian dealbrokers Terry Donnelly and Anthony Black, travelled to Puntland in April of 2005 to tour the country and meet with Puntland leaders.

 

On June 10th, 2005 Puntland president Mohamud Muse Hersi, planning and international cooperation minister Dr. Abdirahman Farole and Terry Donelly travel to Dubai, UAE to begin negotiations on a deal. Later during the trip, the Puntland delegation lands in Nairobi, Kenya to take part of Somali transitional federal government’s (TFG) relocation to Somalia. In Nairobi, it was reported that TFG President Abdullahi Yusuf (the previous and founding President of Puntland) and Puntland President Hersi became "angry" at each other because the TFG leadership refused to honor any agreement signed between a regional government (i.e. Puntland) and a foreign company.[1]

 

The Puntland delegation went ahead anyways, returned to Dubai and signed an agreement on August 30th, 2005 at the Hilton Dubai with Consort Private for exclusive rights to explore and drill for oil in the Nogal and Dharoor blocks. Two days prior to this, the Somali Prime Minister sent a warning to non-Somali companies that any oil deals would have to go through the federal government, not any state government (this despite the fact that Puntland was and is independent of the federal government in all but name).[2]

 

While the details of the deal are known only to the four men who signed it, what is known is that following the deal, a number of Puntland ministers were added to the board of directors, and the government of Puntland by extension must have a sizeable (perhaps even controlling) share in Consort Private.

 

Not to be put off so easily, Somali TFG President Abdullahi Yusuf, in an interview with the BBC on September 9, 2005, says that legally "natural resources belonging to the nation is the responsibility of the federal government". A few weeks later on September 29, 2005 a delegation from Puntland composed of ministers and businessmen travelled to the TFG's interim capital at Jowhar to led by finance minister Mohamed Yusuf "Gaagaab" to unsuccessfully negotiate again for Yusuf's signature on the deal.

 

[edit] Range Resources Purchases Exploration Rights

 

Range Resources purchased 50.1% of Consort Private's exclusive rights to the Dharoor and Nogal blocks on October 5th, 2005 in exchange for $2,500,000 AUD in cash, 17 monthly payments of $200,000, 85,000,000 shares of Range Resources stock and a further 85,000,000 stock options.[3] In June 2006 the remaining 49.9% was purchased from Consort Private with the key assistance of Sir Sam Jonah, who became the Non-executive chairman of Range[4]

 

The deal had several terms, which hinged on certain conditions:

 

1. 6 month exclusive option to acquire Consort’s interest on the terms set out below with an option fee of 100m listed Range shares (RRS) and 50 m options (RRSO) payable subject to any necessary shareholder approvals;

2. 750m Range ordinary fully paid shares, 375m options (unlisted, 5 cents, 1 October 2010) and US$10m conditional on shareholder approval and the completion of a minimum US$25m capital raising;

3. A further payment of 750m Range ordinary fully paid shares, 375m (unlisted, 5 cents, 1 October 2010) and US$20m conditional on shareholder approval and upon completion of the first hydrocarbon well drilled in Puntland;

4. 2.5% net royalty on the Puntland Projects;

 

Range Resources issued a press release the same day stating that the TFG had signed off on the deal. The Prime Minister of the TFG, Ali Mohamed Gedi, fired back less than a week later on October 16th 2005 refuting this claim in a letter to the Australian Stock Exchange, where Range Resources is traded.

 

On November 2nd, 2005, Ali Mohamed Gedi finally accepted an "amendment of contract" between Puntland and Range, removing the last legal hurdle in between Range and exploration.

 

[edit] Exploration Problems and Political Instability

 

On February 26, 2006 the Puntland Parliament faced a confidence vote on President Hersi's Council of Ministers. Heated argument and disputes in the parliament turn ugly, and by the next day at least three people are reported dead near Garowe's Parliament House. The Puntland minister of planning and international cooperation, key player in the negotiations with Consort Private and chief opponent of Range Resources/Africa Oil Corp. deal, Dr. Abdirahman Farole, is "relieved" of his duty by Puntland president Mohamud "Adde" Muse Hersi.

 

The very same day, Range deployed two exploration teams in Somalia. An initial report on results is published a week and a half later on March 9th 2006.

 

The [East Sanaag] clan, one of the [constituent] clans that make up the Puntland state, decided to take exception to the fact that Puntland was going to explore for oil in their territory without their permission, and began preventing Range exploration in Sanaag and western Bari. Puntland was determined that Range teams have access to Sanaag and western Bari (over half of the Dharoor block is in [East Sanaag] territory.), and attempted to muscle their way into Sanaag and western Bari on March 19th 2006. The [East Sanaag] fought them off, and [East Sanaag] parliamentarians in Baidoa, then the capital of the TFG, complained in the parliament two days later about President Hersi's aggressive tactics. At the same time Puntland consistently denied that anything had occurred.

 

A week later Puntland tried again on March 29th 2006, and again was prevented from entering Sanaag and western Bari by [East Sanaag] militia. And again on April 3rd, 9th and 13th. As the fighting began to creep into western media, Range Resources insisted noone had been killed, despite evidence to the contrary. Range chose not to explore in Sanaag.

 

These events led to the seperation of the [East Sanaag] from Puntland and the creation of their own state, Maakhir.

 

[edit] Canmex/Africa Oil Corp. Gets Involved

 

A Memorandum Of Understanding (MOU) signed on October 10th 2006 between Canmex Minerals, Range and Puntland granted Canmex an 80% interest in the "licenses and operatorship" of the Dharoor and Nogal blocks, contingent upon:

 

1. Canmex to pay to Range a signing bonus in the aggregate amount of $5 million within 10 days of signing the agreement[5]

2. The financial commitment over an initial four year period of US$50 million in exploration expenditures; and

3. The payment to Range of an additional US$3.5 million upon commencement of commercial production

 

With the signing bonus paid, and with approval of the Puntland parliament, Range, Puntland and Canmex hammered out a Production Sharing Agreement on January 23, 2007, that confirmed the terms of the MOU signed in October. [6]

 

In order to meet their financial obligations, Canmex sold 4,000,000 common shares in a non-brokered private placement in order to raise $20,000,000[7].

 

[edit] PM Gedi and the TFP battle President Yusuf

 

In November 2006, while the TFG was besieged by Islamist armies in Baidoa and Ethiopia was preparing to invade the Union of Islamic Courts, President Yusuf traveled to the headquarters of the PRC's state-owned China National Offshore Oil Corporation (CNOOC) as well as the smaller China International Oil and Gas (CIOG) Group to ratify a deal with the oil group's chairman and chief executive officer, Fu Chengyu.

 

Seven months later, in Nairobi, TFG Energy Minister Abdullahi Yusuf Mohamad met with Chen Zhuobiao, head of CNOOC operations in Africa, and Judah Jay, managing director of CIOG, to create the final agreement, which was signed by President Abdullahi Yusuf on July 18th 2007. The agreement gave CNOOC exclusive rights to the large offshore blocks off the coast of Mudug, for an undisclosed sum of money and unknown terms.[8]

 

At the same time Canmex official renamed itself Africa Oil Corp. (AOI.V) on August 20th, 2007, due to heightened optimism about their Puntland operations.

 

Prime Minister Gedi decided to get in on all this action himself, and backtracked on his previous, lukewarm endorsement of Puntland's oil exploration agreement and instead proposed a draft law in the Transitional Federal Parliament in August 2007 that would nullify all agreements made after 1991 (when the last functional national government collapsed and the oil companies with existing concessions declared Force Majeure) thus giving the TFG free reign to resell all the exploration rights in the country. The exploration rights for all of Somalia would be sold to Indonesia’s PT Medco Energi Internasional Tbk and the Kuwait Energy Company, and a National Oil Company of Somalia would be created, controlled by Gedi and parliament.

 

This directly confronted President Yusuf's deal with CNOOC, and so the two went to political war with each other, leading to Gedi's forced resignation after more than two months of backroom warfare, on October 29th 2007.

 

Uneasy about all these events, on December 28th, 2007 Africa Oil Corp (formerly Canmex). demanded that President Yusuf formally sign off on the deal before a payment of $20,000,000 to be split between Range and the TFG, or Africa Oil Corp. threatened to pull out of the deal entirely. [9]

[Armchair Politician]

Tribe names removed to comply with board rules.

[ElPunto]

And the bottom line is there will be no real progress on oil exploration in Somalia given the disagreements and fragile political situation.

[Armchair Politician]

Actually there could easily have been lots of progress. It's not the political situation that caused problems, but:

 

a) Politicians selling things that they don't own

b) Politicians making deals they aren't authorized to make

c) Politicians ignoring important issues (stability of the TFP, UIC invasion of Bay, etc) and in fact taking advantage of that distraction to make backroom deals with foreign companies while noone is looking.

 

Researching this article has confirmed my suspicion that Gedi, Yusuf and Adde Musa are all corrupt kleptocrats out to get as much money out of this as they can.

[Som@li]

You must be one of the westerns trying to profiteer the resources of the poor people,Range Resources, will have to pay the conpensation of the citizens of Maakhir killed in Majihan.

 

Ps,

and Melbourne, New South Wales, Australia

~~~Melbourne is in Victoria, not NSW!

[Armchair Politician]

Originally posted by Dabshid:

You must be one of the westerns trying to profiteer the resources of the poor people,Range Resources, will have to pay the conpensation of the citizens of Maakhir killed in Majihan.

 

Ps,

and Melbourne, New South Wales, Australia

~~~Melbourne is in Victoria, not NSW!

Oops my bad.

It was Puntland militias who killed the poor folks in Majihan. Range was just the excuse. Range didn't even know about it, and when they found out they suspended all operations in Sanaag, so Range actually acted honorably there.

[NASSIR]

Actually, the Majihan folks were victorious as they vanquished the hired militia and as they aborted the multi-million project. However, Range Resources, as Dabshid said should take responsibility of the consequences of those killed in the conflict. Monetary recompense would not suffice the lives of those who died defending their land and those unsuspecting hired mercanaries. Setting aside a social net for the risk it is posed to accept would also never help in the future.

[Armchair Politician]

I agree that they should have done more research, and their ignorance of the situation led to the deaths of many people.

 

They may not have been complicit, but that doesn't excuse their lack of due diligence.