Somalia: Petroleum minister in trouble over oil deal with American firm

MOGADISHU, Somalia - Abdirashid Mohamed Ahmed, Somalia's Petroleum and Mineral resources minister, will on Monday [today] appear before Attorney General Suleiman Mohamud, who will interrogate him over a clandestine oil deal, which has caused jitters in the country.

In a tweet about two months ago, Ahmed announced an oil deal agreement between the federal government of Somalia and American firm; Coastline Exploration Ltd, in which he said: "all parties have agreed on principle to work together".

But when the details leaked to the public, Prime Minister Mohamed Hussein Roble was quick to dismiss the deal as " null and void", adding that " my office was not involved at all, this deal remains just alien to me and other government officials".

In an interesting twist, the outgoing President Mohamed Abdullahi Farmajo, who is believed to be the architect of the deal, was also quick to dismiss it as " inconsequential". Farmajo has been at loggerheads with Roble but in this particular incident, they appeared to be reading from the same page.

However, pushed to the corner, Ahmed insisted the president was aware of the deal, arguing that " everything was done within the confines of the law". But appearing deserted, he rescinded his initial sentiments, noting that he was in agreement with the government.

Of controversy is the decree signed by President Mohamed Abdullahi Farmaajo which rules out the signing of government deals with foreign entities until elections are concluded. The country is yet to conclude elections, over a year beyond schedule.

The Petroleum minister is set to make records straight on who was behind the deal and why government protocols were not followed. He's set to explain why Coastline Exploration Ltd is insisting that it paid air tickets for architects who traveled to Turkey for the signing of the deal.

The government had instructed Attorney General to investigate the contract and take appropriate legal measures. But despite the outright violation of the decree, the firm disputes the position by the government, paving way for a court battle.

"I won't go into the legal details of the analysis, but we believe quite firmly that our PSAs [production-sharing agreements] we signed are legally valid and that they're in full effect," said Richard Anderson, in an interview with VOA.

The company further insists it did prior consultations before signing the milestone deal. However, it remains unclear who within the government was pushing for the deal, but a number of Farmajo's allies have been linked to it.

"We did not ignore anything," Anderson said. "Before we signed the PSAs in February, we consulted with the ministry and with the SPA [Somali Petroleum Authority], and we were assured that both the president and PM were aware of the process and they were fine with the signing."

But the executive officer admits Coastline Exploration Ltd did not directly reach the office of the Prime Minister or that of the president when the deal was being signed. However, he adds, the minister and SPA assured the team that the two offices were aware.

"There is a 5% royalty that comes right off the top. Profit is split 50-50. There is a 30% income tax on whatever profits the contractor — i.e., Coastline — makes," he said. There are various other financial benefits for Somalia in the agreement, he added.

According to Anderson, all the terms of the PSAs, including the profit-sharing percentage, are fixed for their 30-year term and will not change during the life of the contract.

Jamal Kassim Mursal, a Somali business expert who worked in the ministry of petroleum and mineral resources, termed the agreement as "unfair" based on some of the details of the agreement in an interview with VOA.

"A fixed oil royalty rate of 5% and a fixed gas royalty rate of 3%, government share becomes 59.8%," he said. "However, if prices fall to $70 a barrel, government share stands at 50%. At any price below $70, the government loses money to the contractor. Sixty dollars a barrel, government share becomes just 42%."

GAROWE ONLINE