* Somalia says oil exploration key to country's future
* U.N. investigators say oil contracts lack transparency
* Oil deals from two decades ago on hold due to war
By Drazen Jorgic and Louis Charbonneau
NAIROBI/UNITED NATIONS, Oct 24 Somalia said it
was reviewing several oil and gas deals that U.N. investigators
say lack transparency and risk hindering development of the
country's energy industry.
Energy firms are cautiously eyeing Somalia's long coastline,
an untapped frontier on the east African seaboard that has
become an exploration hot spot after big gas finds in Mozambique
and Tanzania. Somalia's southern neighbour Kenya has found oil.
The Somalia-Eritrea Monitoring Group (SEMG), an eight-member
panel of investigators that monitors compliance with U.N.
sanctions, said Mogadishu had signed a series of contracts and
cooperation agreements that "highlighted transparency and
accountability issues" in state petroleum institutions.
In a report, the monitors said such deals were "likely to
exacerbate legal tensions and ownership disputes and stunt the
transparent development of Somalia's oil and gas sectors".
Mohamed Keynan, director of communication in the president's
office, said Somalia was reviewing several contracts with the
help of the Financial Governance Committee (FGC), comprising
three Somali members and three donors, including representatives
from the World Bank and International Monetary Fund.
"The Federal Government of Somalia (FGS) will take
appropriate action, based on the advice of the FGC," Keynan said
in a statement sent to Reuters. "However, it is wrong to assume
that all contracts in place with the FGS are in some way
About a dozen companies, including oil and gas majors, had
licenses to explore Somalia before 1991, the year a conflict
erupted that tore the nation apart for the next two decades,
involving clans and Islamist militants.
The breakaway territory of Somaliland, semi-autonomous
Puntland and other regional authorities in the fractured nation
have granted their own licences for some of the same blocks.
Western diplomats have said the government's limited
capacity and experience in negotiating often complex energy and
other deals could mean Somalia received a poor return. Donors
have also been unnerved by earlier U.N. reports that cited cases
of government corruption, charges Mogadishu denies.
In the latest report, U.N. monitors said a deal with
London-based Soma Oil and Gas had "never been made public, nor
was it approved by the Federal Parliament of Somalia".
Lawmakers have in the past challenged contracts that they
said parliament had not been given the chance to scrutinise.
Soma Oil said "the broad terms" of the deal were made public
and said it had invested about $37 million on a programme to
gather and digitalise old seismic information and collect new
The firm, chaired by former senior British politician
Michael Howard, said it was not operating in disputed regions
but was focusing on deep water areas offshore. It said its work
had encouraged other firms to discuss restarting activities.
"The efforts of companies such as Soma Oil and Gas are both
essential and greatly appreciated," said Keynan, adding Somalia
was recovering from war and could not do such work itself.
The monitors said the federal government was in talks with
firms such as Shell, Exxon Mobil Corp and BP
, to revive contracts which were put under force majeure
in 1991 when the civil war broke out.
They said "such negotiations are premature and could spark
conflict, especially since they have not been conducted in
consultation with regional authorities who may be affected".
Shell said it had no comment on such political issues, and
BP denied it was in talks with Mogadishu on blocks where it
declared force majeure in 1991. Exxon did not immediately
respond to requests for comment.
Petroleum Minister Daud Mohamed Omar said on Monday that
Somalia wanted oil output to start in six years.
(Additional reporting by Edmund Blair in Nairobi; editing by
Edith Honan and Emelia Sithole-Matarise)