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Somalia Still Working on Petroleum Law, Aims Oil Exploration

“No company is going to start drilling without agreement with regions,” says Mohamed. “So why rush? It’s not good for the reputation of the country.”

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Petrol
Engineers and visitors view an exploratory well near Dharoor town, from the port of Bosasso on the Gulf of Aden in Puntland, Somalia, Jan. 17, 2012. VOA

The Somali government says it will award exploration licenses to foreign oil companies later this year, despite calls from the opposition to wait until laws and regulations governing the oil sector are in place.

Seismic surveys conducted by two British companies, Soma Oil & Gas and Spectrum Geo, suggest that Somalia has promising oil reserves along the Indian Ocean coast, between the cities of Garad and Kismayo. Total offshore deposits could be as high as 100 billion barrels.

 

“We have presented our wealth and resources to the companies,” Petroleum Minister Abdirashid Mohamed Ahmed told the VOA Somali program Investigative Dossier. “We held a roadshow in London [last week], and we will hold two more in two major cities so that we turn the eyes of the world to contest Somalia.”

But several lawmakers have expressed concern the government is moving too quickly. Last week, the head of the National Resource committee in the Upper House of Parliament accused President Mohamed Abdullahi Mohamed’s government of a “lack of due diligence” and violating the constitution.

Barnaby Pace, an investigator for the NGO Global Witness, which exposes corruption and environmental abuses, says Somalia, after decades of internal conflict, does not have the legal and regulatory framework to handle oil deals and the problems they can cause, such as environmental abuses, corruption, and political fights over revenue.

“There is not a clear consensus about how the oil sector could be managed in Somalia,” he said. “And once Somalia makes deals like the one it’s proposing, it may be locked in for many years and find it difficult to renegotiate or change them to best protect itself.”

Former oil officials speak out

Somalia’s parliament passed a Petroleum Law to govern oil sector in 2008 when the country operated under a transitional charter. But constitutional experts say that law was nullified after a constitution was ratified in 2012.

A proposed new law is now before parliament for debate. The bill says negotiations for oil-related contracts will be the responsibility of the Somali Petroleum Agency, which would not be formed until the law is passed.

Ahmed said government’s timetable for awarding licenses is just “tentative,” though he believes the government can keep to its schedule.

The government says it will accept bids for exploration licenses on November 7, and the winners will be informed immediately. It says production-sharing agreements will be signed on December 9, with the agreements going into effect on January 1, 2020.
The government says it will accept bids for exploration licenses on November 7, and the winners will be informed immediately. It says production-sharing agreements will be signed on December 9, with the agreements going into effect on January 1, 2020. VOA

 

But Somali lawmakers and opposition leaders are worried the government is in a needless rush.

Jamal Kassim Mursal was permanent secretary of the Somali Petroleum Ministry until last month when he resigned.

He says when the government came to power in 2017, the ministry was informed that bids for oil exploration licenses would not be considered until the Petroleum Law was passed and “we are ready with the knowledge and skills.”

Since then, he told VOA, “Nothing has changed — petroleum law is not passed, tax law is not ready, capacity has not changed, institutions have not been built.”

Abdirizak Omar Mohamed is the former petroleum minister who signed the 2013 seismic study agreement with Soma Oil & Gas.

Mohamed said the country needs political consensus and stability before oil drilling. He notes that a resource-sharing agreement between the federal government and Somali federal states has yet to be endorsed by the parliament.

“No company is going to start drilling without agreement with regions,” says Mohamed. “So why rush? It’s not good for the reputation of the country.”

Soma and Spectrum’s advantage

Mursal also objects to an agreement that gives first choice of oil exploration blocks to Soma Oil & Gas, one of the companies that conducted the seismic studies.

According to the agreement, Soma Oil & Gas will choose 12 blocks or 60,000 square kilometers to conduct oil exploration. Among these are two blocks believed to contain large oil reserves near the town of Barawe.

He says the government needs to renegotiate and offer just two blocks instead.

“This is the one that is causing the alarm,” he said. He predicts that if Soma Oil & Gas gets to choose 12 blocks, the company will “flip” some of the blocks to the highest bidder.

oil
Mohamed said the country needs political consensus and stability before oil drilling. He notes that a resource-sharing agreement between the federal government and Somali federal states has yet to be endorsed by the parliament. Pixabay

In 2015, Soma Oil & Gas was caught up in controversy after allegations of quid pro quo payments to the Somali Ministry of Petroleum. The payments were termed as “capacity building.” The following year, Britain’s Serious Fraud Office closed the case because it could not prove that corruption took place.

Somalia’s current prime minister, Hassan Ali Khaire, was working for Soma Oil & Gas at time. Somali officials say that since taking office, Khaire has “relinquished” his stake in the company, said to be more than 2 million shares.

The other company that conducted seismic surveys, Spectrum, also made payments to the Somali Ministry of Finance, according to Mursal.

Mursal told Investigative Dossier that between 2015 and 2017, Spectrum paid $450,000 every six months to the ministry.

A senior official who previously was involved in the Ministry of Petroleum told VOA that Spectrum paid $1.35 million in all. He said the payment was “consistent,” though, with the advice of the Financial Governance Committee, a body consisting on Somali and donors which gives financial advice to Somalia.

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Spectrum has not yet responded to Investigative Dossier requests for an interview.

Current Petroleum Minister Ahmed said the government will do what is best for Somalia, but needs to have a law governing the oil sector in place.

“The parliament has the petroleum law,” he said. “Without it being passed, we can’t touch anything.” (VOA)

Next Story

North Korea Explores Home-Grown, Sanctions-Proof Energy

The North’s interest in tidal energy also reflects a practical desire to exploit existing resources.

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North Korea
North Korean men walk with the West Sea Barrage in the background in Nampo, North Korea, Feb. 2, 2019. VOA

Power-strapped North Korea is exploring two ambitious alternative energy sources, tidal power and coal-based synthetic fuels, that could greatly improve living standards and reduce its reliance on oil imports and vulnerability to sanctions.

Finding a lasting energy source that isn’t vulnerable to sanctions has long been a priority for North Korean officials. Leader Kim Jong Un used his New Year’s address last month to call on the country to “radically increase the production of electricity” and singled out the coal-mining industry as a “primary front in developing the self-supporting economy.” For the longer-term, he stressed the importance of atomic, wind and tidal power.

Since further development of atomic energy is unlikely anytime soon, the power-scarce country is developing technology to “gasify” coal into substitute motor fuels. It also is looking into using huge sea barriers with electricity-generating turbines to harness the power of the ocean’s tides.

FILE - Young joggers pass by as smoke billows from the stack of the Pyongyang Power Plant in Pyongyang, North Korea, Dec. 15, 2018.
Young joggers pass by as smoke billows from the stack of the Pyongyang Power Plant in Pyongyang, North Korea, Dec. 15, 2018. VOA
Coal and hydropower

Coal and hydropower are North Korea’s main energy resources. The North imports nearly all of its oil and petroleum products from China. Solar panels are visible just about everywhere, from urban balconies to rural farm buildings and military installations. Wind remains a very minor energy source.

The North’s renewed focus on oil alternatives underscores what some foreign observers believe are two of its long-term best bets.

Kim’s late father, Kim Jong Il, tried to get international support for developing nuclear power in the 1990s before the North ultimately opted instead for nuclear weapons. That brought some of the most intense sanctions ever applied by the United Nations against the country, making its energy situation even more precarious.

But coal is something North Korea has in abundance.

It’s used to supply thermal power plants and factories, to heat homes and to make fertilizer and even a kind of cloth, called Vinylon. Slow-running, smoke-belching trucks that use a gasification process with firewood are common in the North Korean countryside. Coal isn’t generally seen as a good oil-product substitute because converting it to a liquid form is inefficient and expensive — coal gasification was last used on a large scale in Nazi Germany to keep its cars and trucks moving.

Efforts paying off

Given North Korea’s limited options, it’s a technology that appears to be paying off.

The output from one gasifier unit reportedly destined for the North Sunchon Chemical Plant, north of Pyongyang, could yield synthetic fuel amounting to about 10 percent of the North’s recent petroleum supply, according to a recent study for the Nautilus Institute by David von Hippel and Peter Hayes, two of the foremost experts on the issue. The study cited as one of its sources a Wall Street Journal report from December that tracked the unit to a Chinese exporter.

The facility is believed to be a center of “C-1” technology, which uses coal to make a kind of gas used to produce synthetic fuels, industrial chemicals and fertilizers.

Now that China has reduced its coal imports from the North in line with the sanctions, there’s more available for gasification.

“The project appears to provide a significant benefit to the DPRK, in terms of supplying fuels to compensate for petroleum product imports that run afoul of United Nations Security Council sanctions passed in the last two years, although the project will not completely replace all lost imports on its own,” they wrote in the report.

DPRK is short for the North’s official name, the Democratic People’s Republic of Korea.

A North Korean man looks out to the sea as he stands on the West Sea Barrage in Nampo, North Korea, Feb. 2, 2019. North Korea's coast is a rich tidal power resource, one European official said.
A North Korean man looks out to the sea as he stands on the West Sea Barrage in Nampo, North Korea, Feb. 2, 2019. North Korea’s coast is a rich tidal power resource, one European official said. VOA

Power from the tides

The North’s interest in tidal energy also reflects a practical desire to exploit existing resources.

Glyn Ford, a former member of the European Parliament with extensive experience with the North, said he has had several discussions with North Korean officials regarding tidal power and even helped arrange a study tour to a facility in the UK a decade ago. He said they have tried to invite experts to the North.

The country is perfectly situated for tidal power.

“The bulk of the Korean Peninsula’s west coast is a rich tidal power resource,” Ford said in a telephone interview with The AP. “There are some detailed studies of the potential in South Korea and the same resources are there to be exploited north of the Demilitarized Zone.”

The world’s largest functioning tidal power plant is near the South Korean city of Ansan. It opened in 2011 and produces about enough power to support a city of 500,000.

Kim Jong Un has shown a strong penchant for mobilizing his million-man military on big projects. And the North has shown it can build something like a tidal power plant.

A guide stands next to a model of the West Sea Barrage in Nampo, North Korea, Feb. 2, 2019. North Korea is exploring alternative energy sources.
A guide stands next to a model of the West Sea Barrage in Nampo, North Korea, Feb. 2, 2019. North Korea is exploring alternative energy sources.VOA

One of North Korea’s proudest accomplishments is the gigantic West Sea Barrage, which was completed in 1986 at a cost of $4 billion. The huge seawall near the city of Nampo, a port about an hour’s drive from the capital, crosses the mouth of the Taedong River and helps control flooding and reduce the amount of salt that seeps in from the ocean, increasing the amount and quality of arable land.

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“The attraction is that, apart from the turbines, it is all a gigantic earth-moving project,” Ford said. “That’s ideal for the Korean People’s Army skillset.” (VOA)