Site icon The Journal of Africa

Somalia: why was the oil deal with Coastline Exploration cancelled?


In Somalia, five days before the general elections, the two rivals, the president and his prime minister, have agreed to end an oil agreement with an American company.

Last Saturday, only a few hours after the announcement of the signing of an oil production sharing agreement (PSA) between Somalia and the American company Coastline Exploration, the deal involving seven offshore blocks fell through.

Indeed, Somali President Mohamed Abdullahi Mohamed, nicknamed Farmaajo, and his Prime Minister Mohamed Hussein Roble have both denounced the agreement, which they consider illegal.

The oil agreement, the first PSA agreement in the country's history - Somalia is not a producer of hydrocarbons despite its large reserves - was concluded by Oil Minister Abdirashid Mohamed Ahmed.

An agreement deemed illegal by the presidency and the prime minister, who recall that the electoral period prohibits the conclusion of such an agreement. According to the Somali Constitution, the government is indeed prohibited from “concluding agreements with foreign States or entities (…) during an election period”.

Somalia, future major producer of hydrocarbons?

For the American company Coastline Exploration, which is owned by American-Swiss tycoon Jake Ulrich, it was the fifth major agreement in East Africa since the company was founded in 2009. Coastline Exploration had taken over the assets of the British major Cove Energy in 2012 and successfully secured oil and gas deals in Mozambique, Tanzania and Kenya.

Before it was canceled, the agreement, explained the Minister of Petroleum, had been signed after “prolonged negotiations” between the Somali government and Coastline Exploration. "Seismic exploration indicates that Somalia has the potential to become a major oil and gas producing country," Minister Abdirashid Mohamed Ahmed said.

But in the end, nothing will happen, for the moment at least. The fault, in particular, with the dispute which opposes Faarmajo to Roble.

A disunited front awaiting the elections

In the Somali press, we are delighted with the new "front" formed by the Prime Minister and the President, who act in the name of "the interest of the nation, even in the midst of elections".

However, the joint decision of the presidency and the government is simply a matter of respect for the law. Farmaajo and Roble have been at loggerheads for months. After President Mohamed Abdullahi Farmaajo had his term extension declared void by parliament, the Somali head of state suspended his prime minister twice. And Mohamed Hussein Roble seems to have ambitions to replace Farmaajo in his post.

The geopolitical context is complex. During his tenure, Farmaajo – who has dual American-Somali nationality – was backed by Africom chief Stephen Townsend. But the latter abandoned his ally in December, after yet another suspension of the Prime Minister. For his part, Mohamed Hussein Roble maintains good relations with European countries, in particular with Italy, Germany and the Scandinavian countries.

At the national level, the rampant insecurity and the threat of the terrorist group Shebabs mean that in reality, the state is truly sovereign only in the capital Mogadishu.

Another concern that the two chief executives are seeking to resolve before the February 25 elections. Somalia's electoral system provides for the election of delegates from each clan or tribe in the country, who appoint parliamentarians, who in turn elect the president.

The oil deal with Coastline Exploration will therefore, in reality, only be suspended. While the country is experiencing one of the most serious socio-economic crises, a PSA in the hydrocarbons sector could act as a springboard for the chief executive. Whether in the near future, Roble or Farmaajo, the transfer of natural resources will be the asset of the next occupant of Villa Somalia.

Exit the mobile version