Oilmen ready for risky push into Somalia

May 15, 2013 at 5:18 PM

MOGADISHU, Somalia, May 15 (UPI) -- Foreign companies are getting ready to undertake the risky business of exploring for oil in war-torn Somalia, a quest that could trigger new conflict as the Western-backed government struggles to stop die-hard Islamist insurgents.

"The world's leading oil companies are increasingly accepting that their quest for new reserves will take them into challenging new territory," the Financial Times observed this week.

"In regions such as the arctic, the problems are technical. Around the Horn of Africa, companies must calculate whether political and security risks will put too heavy a burden on their production costs.

"This is hazardous territory in which to operate."

In 2011-12, U.S.-backed African forces drove al-Shabaab, the main Islamist force, out of Mogadishu and seized its main urban strongholds, including the port of Kismayo 200 miles to the south.

But large swathes of rural Somalia remain in the militants' hands and they're waging a guerrilla war of suicide bombings and hit-and-run attacks.

President Hassan Sheik Mohamud of the foreign aid-dependent Transitional National Government, who was elected seven months ago, narrowly escaped being killed in a suicide bombing in Mogadishu a few weeks ago.

Major oil strikes would potentially transform Somalia's ramshackle economy but there are fears the vast revenues it would produce could bring about new conflicts, possibly re-energizing al-Shabaab, whose transnational wing has strong links to al-Qaida.

Indeed, with oil exploration also under way in neighboring Ethiopia and Eritrea, staunch enemies who fought a bloody border war in May 1998-June 2000, the region may well become part of the East African oil and natural gas boom that runs down the Indian Ocean coast to Mozambique.

But the political landscape in historical Somalia, which includes the semi-autonomous region of Puntland and the self-declared states of Galmudug in the north and Somaliland on the border with Djibouti, is complicated, messy and militia-ridden.

It's difficult even to determine exactly what territory Mogadishu controls.

"Attempts to carve up oil blocks before the Mogadishu government even controls the whole national territory are undermining efforts to bring peace and stability to a state that has been shattered by 22 years of war and that exports terrorism," the Financial Times observed.

"The race to lay claim to resources risks triggering wider conflicts: regional authorities have been hostile to central government since the military dictatorship of Siad Barre.

"When he was deposed in 1991, warlords carved up the country -- and several clan-based militias still hold sway, sometimes cutting deals with al-Shabaab.

"The danger is that the race for oil will feed a destabilizing rivalry between Mogadishu and other regions -- some still influenced by former warlords -- just as the international community is celebrating progress."

It's a fragile progress at best. Al-Shabaab remains a deadly threat, even within the war-battered capital on the Indian Ocean, and Western intelligence services caution against writing it off as a spent force.

Much will depend on whether Mohamud can get a fully functioning government operating. Somalia's been without one since Siad Barre was booted out.

There is oil in commercial quantities out there. It was found by Western oil companies during the Siad Barre era. But the hunt was abandoned after his ouster, which plunged

the territory, ruled by Britain and Italy until 1960, into incessant clan warfare that eventually morphed into the Islamist insurgency that continues to this day.

The quest for oil now under way includes Eni of Italy and Royal Dutch Shell with BP and Conoco of the United States expected to join the hunt.

Eni, Shell and Conoco were among the Western majors that conducted exploratory drilling during the Siad Barre era. They want to reclaim their old concessions and seek new production-sharing contracts.

The Canadian wildcatter Africa Oil began exploration in Puntland in the arid northeast in January 2012, drilling Somalia's first wells in 21 years.

Issa Farah, head of Puntland's Petroleum and Minerals Agency, said at the time estimated there were reserves of 3 billion-4 billion barrels of oil in that sector.

Estimates of Somalia's oil reserves, onshore and offshore, run as high as 110 billion barrels.

There are jurisdictional problems already offshore, where Norway's Statoil is prospecting off the Jubaland region.

Neighboring Kenya, whose forces played a key role in fighting al-Shabaab and currently hold Jubaland, claims the offshore zone.

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