Somalilandsun: A few days into the New Year, armed Somali intelligence officials were seen escorting guests into three bullet-proof cars at Mogadishu’s Aden Adde International airport.
According to DeSmog An unusual quiet stretched through the capital’s normally busy main streets as the convoy snaked through cordoned-off roads towards Somalia’s presidential palace.
Local and international media reported that two foreign companies were arriving in Mogadishu to sign a “secret” historic oil deal with the Federal Government of Somalia (FGS), the first agreement of this kind since civil war erupted in the country in 1991. Opposition politicians wrote a letter to the president that warned against the “dangerous agreement” which they said raised concerns over transparency just a month ahead of the country’s first “one person, one vote” election since 1969.
The deal was all but signed. A huge banner hung ceremoniously behind a table in a room lined with chairs, entitled “Signing Of Production Sharing Agreement,” referring to the crucial legislation that would start the resource sharing process. Just weeks before Joe Biden entered the White House, earning his place in part on a platform of dedicated climate action, a banner with the names of two U.S. companies — Liberty Petroleum and Coastline Exploration — and the date, January 4, were emblazoned next to a map of oil concessions.
And then — silence. Unconfirmed reports detailed a day-long postponement, followed by a last-minute cancellation. The two companies vanished from Mogadishu. Days later, a government minister confirmed no deal took place, but gave no further explanation about what happened.
After decades of political unrest, a relative emerging peace had emboldened the government to put its oil up for sale. This “final frontier” for the world’s fossil fuel industry — with Somalia’s offshore oil estimated to be as much as 110 million barrels — was finally within reach, and these little-known exploration companies were the first to want a piece of the pie.
Opposition politicians reacted to the deal falling through with relief, as well as concern. Any internal disputes over resource sharing could spell disaster in Somalia, a politically fractured country recovering from decades of war. The burning of fossil fuels extracted off its coast could further exacerbate the impacts of climate change already devastating the region, through intensifying drought and uneven rainfall that puts millions of lives at risk.
For now, the foreign companies wanting to sign this highly contested deal have gone back into the shadows. But those looking to cash in on Somalia’s resources may simply be waiting until any issues are ironed out — from the regulatory framework to political outcry — biding their time until they can return.
The secrecy around the deal is perhaps best understood in the context of the Horn of Africa nation’s politics, which have been shaped by decades of conflict and ongoing clan-based division. A bitter civil war, triggered by the toppling of dictator Mohamed Siad Barre in 1991, raged in the country for more than 20 years, while Islamic militant insurgent group Al Shabab continues to carry out regular bombings throughout the country.
Somalia experienced its first oil rush from the 1960s, with licenses awarded to oil majors such as Eni, Total, Chevron, and Shell in the 1980s. However, a “force majeure” was imposed in 1991 after Barre was toppled, a state which effectively freezes resource extraction in conflict-stricken areas. Only after the formation of a central federal government in 2012 has oil sharing even become a possibility.
Launching the country’s first ever oil licensing round for seven offshore oil blocks in August last year, Abdirashid Mohamed Ahmed, Minister of Petroleum & Mineral Resources, spoke about its “vision” for attracting foreign investors and how the “opportunities for the international exploration and development majors are enormous”.
But 40 years on from Somalia’s first oil rush, those companies at the front of the line may not be what the country expected. While international oil majors continue to harbour dormant interests in Somalia, Liberty and Coastline, two fairly unknown U.S. private exploration companies with limited revenue and little experience, are first to test these waters.
The financial benefits for all parties under such a deal were clear. The proposed Petroleum Sharing Agreement would reportedly have given Liberty and Coastline access to all seven offshore oil blocks — the first set ever to be granted to a foreign company. Meanwhile, the government would have taken a “signature bonus” of $20 million from the deal, just ahead of a planned federal election.
These two companies hoping to exploit this latest oil and gas frontier, however, have had a long, and sometimes troubled history in the region. And both have connections to high profile politicians at home and in Somalia.
Coastline, in its former incarnation as UK-registered Soma Oil and Gas, signed a seismic option agreement (SOA) with Somalia’s federal government in 2013, giving them exploration rights and first dibs on up to 12 oil and gas blocks. Soma successfully completed this exploration in 2015, but progress stalled when it was investigated by the UK’s Serious Fraud Office over allegations of bribery and corruption in Somalia. The 17-month investigation closed in December 2016 due to lack of evidence, despite finding “reasonable grounds” to suspect wrongdoing.
The allegations made waves far beyond the oil industry, in part due to the company’s links to both the British and Somali political elites. Lord Michael Howard, the former Conservative leader, chaired the company since it was founded in 2013. However, the Serious Fraud Office concluded he had committed no wrongdoing, and he remained at the company until stepping down in June 2018.
Also on the board was Hassan Ali Khaire, who served as Soma’s Africa executive director until February 23, 2017, when he was sworn in as Somalia’s prime minister. Since then, Khaire has reportedly relinquished his stake in the company, reported to be more than two million shares. In 2020, he was ousted from office for his failure to move towards fully democratic elections.