By Katrina Manson in Nairobi
Michael Howard, the former leader of Britain’s Conservative party, has spearheaded the first oil deal with the new government of Somalia, a country destroyed by two decades of civil war, piracy and terrorism.
Lord Howard, who joined newly formed company Soma Oil and Gas as non-executive chairman only three months ago, signed the deal in Mogadishu, the shelled-out capital of Somalia where al-Qaeda-linked jihadists mount regular suicide bomb attacks, during his first visit there on Tuesday.
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Interest in oil and gas exploration along the east African coast has surged after commercial quantities of oil were discovered in Kenya and Uganda along with gas in Tanzania and Mozambique further south sending many wildcat explorers into high-risk nearby prospective areas including Somalia.
“Because of the obvious reasons it’s very much underexplored,” Robert Sheppard, Soma’s chief executive who is also an adviser to BP, told the Financial Times after the signing, citing the many security issues.
His company, formed this year, will put armed guards on board ships to ward off Somali pirates who have previously commandeered vessels and demanded millions in ransom pay-offs.
The weak new government, the most representative in years, said earlier this year the broken state was too fragile to risk oil exploration because it was likely to pit different regions and warlords against each other. UN investigators also said in a report this year that inconsistencies in the legal framework regulating oil “risk exacerbating clan divisions and therefore threaten peace and security”.
Mr Sheppard said he believed his survey would instead increase stability by helping generate revenues. He said Soma will undertake a seismic survey costing “north of $20 million”, largely offshore in deep waters, with right to explore onshore as well.
“In consideration [for doing the survey] we want to be able to go in and get exploring . . . in front of the pack,” said Mr Sheppard, who said Soma would have first dibs on the most prospective blocks turned up by his survey. “It is a frontier thing but again there are individuals and groups excited enough to put their money.”
Abdirizak Omar Mohamed, minister for natural resources in Mogadishu, said the agreement stipulated Soma could apply for up to 12 oil blocks in return for undertaking the survey and handing over the data to the government.
Mr Abdirizak said Lord Howard’s high profile – he was UK home secretary from 1993-97 and leader of the Conservatives from 2003-05 – was critical to agreeing the deal.
Mr Sheppard said “mutual acquaintances” in the UK government told both him and Lord Howard that “one of the things that might help [Somalia] would be giving them a kick-start in the hydrocarbon sector”.
“Obviously Lord Howard talks to lots of people and he was getting lots of positive signals,” said Mr Sheppard.
In May both Mr Abdirizak and President Hassan Sheikh Mohamud told the FT they would not sign any oil deals until the petroleum bill and the new constitution were made compatible, but they have now abandoned that stance. “We realised we had to take a different approach,” said Mr Abdirizak.
The UK has hosted a Somalia conference two years running, including a day dedicated to business deals attended by oil executives, and this year opened an embassy within the secure airport area in Mogadishu. A diplomat from the UK also beat Norway to head up the UN mission to Somalia.
Mr Sheppard said Soma would steer clear of disputed waters claimed by Kenya as well as any blocks claimed by former license holders including Shell and Total, who put their activities on hold when the civil war started.