Fight over oil revenues would harm Somalia peace prospects

MOGADISHU Mon May 21, 2012 4:02am EDT

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MOGADISHU (Reuters) - Somalia's embattled central government will not argue with semi-autonomous Puntland over potential oil revenues for fear of scuttling a fragile peace process, but a top official said on Monday the law made clear control lay with Mogadishu.

Canadian firm Horn Petroleum, majority-owned by Vancouver-listed Africa Oil Corp., and its exploration partners started drilling in March in Puntland's Dharoor Block but have yet to announce any proven reserves.

Africa Oil and joint venture partners Range Resource Ltd. (RRS.AX) and Lion Energy entered into production-sharing agreements for the Dharoor Valley Exploration Area and the Nugaal Valley Exploration Area directly with Puntland, bypassing Mogadishu which is grappling with an Islamist insurgency.

"Our policy is to let the oil come first rather than now going to Puntland and making our point," Deputy Minister of Energy Abdullahi Dool told Reuters.

"Because of the situation between different regions, we don't want to push anyone to the wall. We don't want to make too many Somaliland situations where regions want to break away," he said in an interview.

Dool was referring to the northern breakaway enclave which declared independence in 1991 but is not internationally recognized.

"First of all let there be oil. You can't fight when everything is underground," said the minister, whose portfolio also includes water, petroleum and mineral resources.

Somalia's interim federal government is tasked with adopting a new constitution by August, aimed in part at redefining the relationship between Mogadishu and the regions and ending a two-decade cycle of violence.

The Western-backed government has been fighting al Shabaab militants who still control large swathes of the country and want to impose Sharia law.

Puntland has objected to the first draft of the constitution, saying it left too much power with Mogadishu.

WHO GETS WHAT?

Dool said the country's petroleum law made clear the government should dictate license agreements with foreign investors, while ensuring the regions get a cut.

"It has very clear guidelines on the rules on who gets what and what will be the way to resolve (disputes) between central government and (the) regions," he said.

"The petroleum law makes it very clear it is the central government who has absolute control but there is a role for ... local government or regions."

Muddying the waters further is the fact that Italian oil explorer Eni may still have legal rights to the Dharoor block.

Eni was issued a licence by the Somali government in the 1980s to explore Dharoor. It claimed force majeure as the country plunged into chaos, with warlords and then Islamist militants filling the power vacuum.

"We abide by every international agreement the governments before us have committed to," said Dool.

Dool said the Somali government had not approached the Italian oil giant on the issue as "our first priority is to pacify the country".

(Editing by Yara Bayoumy and Jason Neely)

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