Is Somalia ready for Oil Exploration?
In early 2019 the Turkish President Recep Tayyip Erdogan announced that Somalia had invited Turkey to explore oil in its waters in the Indian Ocean. The timing of this development raised eyebrows too many directions. Somalia under President Mohammed Abdullahi Farmajo is still grappling with many issues ranging from insecurity, weak regulatory and legal frameworks, feeble institutions and a populace fatigued by a protracted civil war that has dented their ability to engage in productive activities in its economy. This underlying situation paints a precarious picture in terms of the ability of the state to effectively deliver maximum value for the people of Somalia in form revenues arising from the oil.
One would wonder the choice of time and the significance of announcement by the Turkish President on his way from the Berlin Conference on Libya, which also has substantial oil within its borders. It is no doubt, that today Libya is facing challenges like those of Somalia where there is incessant conflict after the demise of Muammar Gaddafi in 2011. Libya has been of interest to the Western Nations keen to make a foray into the oil industry which has estimated oil reserves of 48 billion barrels, the largest in Africa and ranked 9th largest in the world. The Berlin conference followed a similar script of past conferences on Somalia in Brussels in London where some of the Western powers coalesced to discuss the future of Somalia.
Huge Deposits
In November last year, the Minister of Petroleum and Mineral Resources Abdirashid Mohamed Ahmed told the Africa Oil and Power conference that Somalia holds huge opportunities for investors looking to enter the East Africa Market. He dangled the 15 blocks up for grabs in terms of licensing to the potential investors in the annual meeting in CapeTown. The East Africa region has in the last decade seen Kenya and Uganda make significant discoveries that have put them at the fore in terms of oil putting their economies on a meteoric rise trajectory with close to 10Billions barrels of recoverable oil.
However, the nascent sector has not experienced growth despite the discoveries due to weak or non-existent regulatory and legal framework to support the development of the resources. Due to this underlying situation, the countries still rely heavily on external support to align its legal regimes and regulatory framework for the oil and gas industry. This in its sense, may amplify risks of benefits not coming to the African countries like Somalia who have discovered oil. All over Africa, there have been numerous occurrences of dodgy deals that are done outside the remit of the due process devoid of requisite standards of international best practice. As such, it is not clear on the terms on which Turkey will be exploring oil in Somalia’s territories and how the benefit-sharing formula has been structured -maybe this will be clear in the coming days. Otherwise, with the obscurity that comes with the announcement, Somalia may be in an agreement skewed to the ‘friends’ interest at the expense of the Somalia citizens. An interesting case was reported by Bloomberg in 2015 where Soma Oil and Gas, a British Company was poised to benefit from 90 percent of the proceeds of Oil while Somalia’s government was to get a paltry 10 percent according to the contents of the Production Sharing Agreement. This case is replaying itself in Africa and sets the stage of the famous ‘Oil curse’.
A Friend with benefits
Turkey is not a stranger in Somalia. It will be remembered that the Turkish government has had a significant presence in Somalia since the adverse 2011 Horn of Africa famine that hit Somalia severely. Since then they have offered humanitarian, reconstruction and military support to Somalia to a great length more than any other nation on earth. This means that close to a decade, they have built a strong relationship with Somalia to the extent of spotting potential opportunities for investment. It is not hard to ask if this ‘invitation’ to explore oil is indeed from Somalia or is one championed by the Turkish as a soft payback for the past friendly gestures. Despite this ‘friendship’, Turkey has been very active in the Arabian Peninsula as a serious deal-maker in as far as oil is concerned and this latest development might just be part of its scripts to expand its footprint in the oil market which is predatory in many respects.
Geopolitics
Somalia has been in the limelight in the last 3 decades. Besides the civil war, the stories about Somalia cannot be complete without mentioning Piracy, famine, and terrorism. If the oil reserves in Southern Somalia are proven to substantial, it will provide a new twist to the plot of this fragile nation. As it finds itself in the geopolitical tides of the Horn of Africa and the Gulf, Somalia has found itself many times in the battle of might by these ‘friends’. It will be remembered that Somalia was one of the actors in the Saudi-led alliance that acted to alienate Qatar for not playing ball. Instead of siding with UAE -Saudi Alliance, Somali took a neutral stance which was interpreted to be sympathetic to Doha. Indeed, all these countries in the conflict are all oil-rich and by hanging out with them Somalia seems to send a message of its desire to be in that space by aligning its foreign policy to affect these machinations.
Territorial Disputes
As the conversation on the potential for oil in its territory rages and more interests from friendly nations increase. It is also interesting to see how the issue of Kenya-Somalia Territorial dispute which has been going on since 2014 at the International Court for Justice(ICJ) in The Hague, Netherlands is ruled. Somalia sued Kenya for unlawful operations in her maritime territory which covers 100,000 Square Kilometres and is thought to contain large deposits of oil and gas. This dispute has led to frosty diplomatic relations leading to the expulsion of the Somalia envoy from Nairobi as the tensions heightened. Which the ruling is much anticipated in June 2020, it is bound to further complicate the relationship between the two countries irrespective of who wins. If Kenya wins, Al-Shabaab has already pronounced itself of not recognizing the ICJ as morally competent to rule on the matter despite Somalia’s government’s sentiments to the effect of abiding by the ruling. If the ruling favors, Somalia, it will be interesting to see how that will impact its commitments to the AMISOM force in Somalia. Will Kenya withdraw troops or not? In another spectrum, the ruling will set a legal precedent and a domino-effect for countries along the Indian Ocean but with similar territorial disputes to pursue a similar path
Enabling Environment
If indeed Somalia becomes a successful player in the oil business, it will have a major stake in redefining the power-play in the Horn of Africa, Gulf, and the East Africa region. But Somalia needs to reset its foreign policy and reconnect to its largest trading partners like UAE and Saudi. This is primarily because even if oil does not bring economic gains, the Somali people are vibrant, and the country is strategically located to be a hub for trade. Whether it pursues the oil route or trade route, the political and security situation in Somalia remains precarious to sustain huge investments like those required to run a successful exploration campaign. As Somalia is on the recovery path, more attention needs to go towards developing requisite infrastructure, easing off hostility from warring clans and warlords, dealing with the terrorism threat by providing alternatives for employment. While Turkey, has played a key role in many spheres during the reconstruction period, its excitement about exploring oil in Somalia is premature for a country that is struggling to rediscover its identity. The post-conflict situation is still weak, and some countries can already see the opportunities to reap from to bolster their economies and leave the country desolate. Somalia, must learn from other countries in Africa and not walk in the same path in terms of defining its future about available natural resources.
