Early this month, dozens of people gathered outside the Claridge’s Hotel in central London to protest against the Federal Government of Somalia (FGS)’s decision to award oil exploration licences to foreign companies later this year. The hotel was the venue for the International Conference on Somalia Oil and Gas that was hosted by Spectrum, a leading seismic data processing company. The conference was aimed at showcasing possible locations in Somalia where crude oil reserves can be exploited. Last year, the FGS announced a first round of bidding on 206 offshore oil blocks, mainly in southern Somalia.
The decision by President Mohamed Abdullahi Farmajo’s government to put Somalia’s oil reserves on the predatory oil and extractive industries’ market is being viewed by many as a recipe for disaster in a country that has suffered from more than two decades of civil war and which has few or no regulatory frameworks or laws in place to manage its oil in the interest of the Somali state and its people. Jamal Kassim Mursal, who was the permanent secretary in Somalia’s petroleum ministry until last month, when he resigned, told the Voice of America that Somalia was not yet ready for any oil exploration because “nothing has changed – petroleum law is not passed, tax law is not ready, capacity has not changed, institutions have not been built”.
The decision by President Mohamed Abdullahi Farmajo’s government to put Somalia’s oil reserves on the predatory oil and extractive industries’ market is being viewed by many as a recipe for disaster in a country that has suffered from more than two decades of civil war A study published in 2014 by the Mogadishu-based Heritage Institute of Policy Studies cautioned that it was still too early for Somalia to be venturing into the oil industry because the country faces a host of challenges and obstacles that need to be addressed before any viable oil exploration and production can start.
These challenges and obstacles include scant infrastructure for the transport and processing of oil, political volatility, institutional fragility, physical insecurity and ambiguous property rights. If not handled with caution, warned the report, Somalia’s oil could prove to be a curse. Given the high levels corruption within the Somali government, and in light of the country’s fledgling state institutions, the absence of checks and balances, as well as nascent democratic structures, the hydrocarbon sector’s economic spoils are likely to also ruin politics, said the study’s author Dominik Balthasar.
Lack of oversight and transparency could lead to conflict as competing forces seek to control the lucrative, but highly opaque, sector. “The problem arises in light of the fact that Somalia not only needs to counter the standard challenges arising from the resource curse, but must do so in the context of fragility.” A study published in 2014 by the Mogadishu-based Heritage Institute of Policy Studies cautioned that it was still too early for Somalia to be venturing into the oil industry because the country faces a host of challenges and obstacles that need to be addressed before any viable oil exploration and production can start.
