Somaliland has had some success at attracting companies to explore for oil, but is burdened by Somalia’s troubles and by its lack of international recognition, writes Nadine Marroushi.
Norwegian minnow Asante Oil is the latest player to be awarded blocks in breakaway Republic of Somaliland’s under-explored territory (AE 136/15). It was awarded onshore Blocks 13 and 14, covering 20,000km2 east of Hargeisa and south of Burco. Most blocks in the region were assigned to major oil companies when former Somali president Mohamed Siad Barre was in power, but the licence holders declared force majeure when civil war broke out in 1991.
Asante’s chief executive Jarand Rystad told African Energy he was “not concerned by any of the former concession holders. We relate to the new legitimate Somaliland government that has been in power for 17 years. To my knowledge, previous licence holders have been asked to come back, but have declined. Moreover, exploration periods are normally three to seven years and activity is required.”
White Nile Ltd’s experience in the Government of Southern Sudan region suggests things might not be as simple as Rystad claims. The Somaliland government is not internationally recognised, and as far as the original licence holders are concerned, their force majeure remains in place. Prime Resources, which holds Block 26, place a lot of emphasis on the fact that its acreage has had no previous owners.
In phase one, Asante has committed to acquiring seismic data, but has yet to award a contract. “Seismic crews are services in high demand these days, but we have been in concrete talks with several providers and hope to close a deal soon,” Rystad said. In phase two, Asante plans to drill. The potential is based on it being an extension of the Jurassic rift graben in Yemen. If hydrocarbons are discovered, Asante’s production-sharing agreement is structured so that an increasing share of the profit goes to the government as prices or volumes get higher.
The licence was approved by the cabinet in July. Asante did not pay a signature bonus, but has committed to sponsoring a water drilling rig and social programmes. It has also sponsored a seismic and aeromagnetic acquisition programme for the entire country. Rystad said: “With regards to our operations in Somaliland we are following the advice of the Norwegian government programme Petrad. This works with governments in Africa and elsewhere to foster transparency and a fair distribution of income from the petroleum sector. We want to bring the best of the Norwegian tradition of wealth distribution from the oil sector to the entire population of Somaliland.”
Rystad was first approached a year ago by Norwegian Somalilanders to participate in the region’s oil business. “I believe that most companies have been hesitant about getting involved because of security concerns and political risks in Somalia. However, we are impressed by the fact that Somaliland has been able to maintain a peaceful state with limited international support. We regard the current elected government for Somaliland as a legitimate government, and expect that the stability will continue going forward,” he told African Energy.
Striving for independence
Somaliland “had all the ingredients of catastrophe and avoided it,” Royal African Society director Richard Dowden told a Frontline Club event in London on 9 September entitled Somaliland: Getting it Right in Africa. The main theme was to analyse how Somaliland, whose neighbour is war-torn Somalia, has managed to shelter itself from clan fighting, and what prevents it gaining international recognition as a sovereign state. To sum up a long and complex story, the influence of British values on Somaliland during the colonial era, compared to the mindset of Italian rule in Somalia, coupled with the inherent democratic values of the Somali National Movement, which fought against Siad Barre’s dictatorship, have all played a role in shaping Somaliland today. Although it is far from international recognition, the former British colony is widely accepted as one of the most peaceful areas in the region.
Having successfully broken away from Somalia, Somaliland now strives for independence. Edward Mason at Independent Diplomat, a not-for-profit diplomacy consultancy, said: “Its sovereignty is a political not a legal issue. Somalia’s governing Transitional Federal Government (TFG) opposes Somaliland’s independence, and its location makes it a matter for the African Union, which lacks the capacity. Also, the TFG is a member of the AU giving it vetoing power, Somaliland isn’t.”
The disputed territory between Somaliland and the neighbouring breakaway Republic of Puntland is also an obstacle (AE 135/24). Both sides lay claim to a territory believed to be resource-rich and two clans, the Dhulbahante and Warsengeli, believe they are not served adequately either by Somaliland or Puntland. Many say the dispute goes back as long as Somalia has existed; Dowden said clan elders were able to manage the two communities peacefully. But the issue is with borders. Puntland has already given a large part of this region to Australian minnow Range Resources for exploration, while Somaliland invaded Laas Canood earlier this year to stake its claim. Range’s plans to drill in the area were put off, and they are now working further north in the Dharoor basin. Somaliland’s UK representative Adam Musa Jibril told African Energy: “neither president has had direct contact to discuss this issue,” although he insists it will be resolved peacefully.
The attention of international oil companies in Somaliland is positive, but with the issue of borders still in such a fragile state, it begs the question of whether exploration may fuel further tension. Somaliland Focus chairman Michael Wallis told African Energy that “there have been clashes on the border between Ethiopia and Somaliland with clans who thought the Somaliland soil was oil rich. I hope no oil is found before the other issues are resolved, because it will fuel tension.”
A concern for Jibril is the growing influence of Islamists in Somalia, where the Islamic Courts Union (ICU) is leading an insurgency against the Ethiopian-backed TFG, which ousted it from government in December 2006 with US assistance in its fight against the ‘global war on terror’. The ICU recently took over the southern Somali town of Kismayo, whose main constituents are from the same majority clan found in Puntland, the Majeerteen. However, this may not be all bad: Mason and Wallis said it might take a crisis like the resurgence of Islamist power in Somalia for the international community, particularly the United States, to take notice, and could encourage moves to give Somaliland its independence.
Short of international recognition and a seat at the United Nations, Somaliland is increasingly being recognised by international major institutions, such as the European Union, World Bank Group (WBG) and International Monetary Fund. The EU is paying for Somaliland’s March 2009 presidential elections, and the WBG provides some development assistance. Somalilanders can also often travel with a Somaliland passport.