Somalia recentlyย reached a landmark agreementย with Shell and Exxon Mobil to develop the vast petroleum reserves believed to lie off the troubled countryโs coast. The deal rekindles a previous joint venture with the two oil giants that was cut short in 1990 when the ousting of Somali dictator Mohamed Siad Barre threw the country into a prolonged period of instabilityโand rekindles debates over whether oil will present greater opportunities or risks to Mogadishu.
Somaliaโs new petroleum law, passed by the federal parliament earlier this year, has paved the way for this renewed exploration of the countryโs extensive natural resourcesโestimated at as much as 100 billion barrels. The government hopes that drawing on these riches will help kickstart economic regeneration as the countryโs security situation slowly but steadilyย improvesย after decades of conflict, terrorism and piracy.
Talks are now being held to enable the agreed concessions to be converted intoย revenue sharing agreementsย (RSAs) that will return 55 percent of offshore oil revenues to Somaliaโs central government, with the remainder being channelled to member states. A new licensing round, covering another 15 offshore blocks, has begun, with concessions expected to be awarded early next year.
Rebuilding a damaged economy or fuelling rifts?
Concerns are nevertheless rising that the possible influx of petroleum resources may exacerbate existingย rifts between Somali states. The adjacent states of Somaliland and Puntland have disputed the ownership of the oil-rich Sool and Sanaag regions for decades; if an exploration licence were granted to a foreign company, the situation could easily descend into war.
Meanwhile, the prospect of oil revenues has also added fuel to the fire of a long-running maritime border row between Somalia and Kenya. In February this year, Nairobi accused Mogadishu of anย โillegal land grabโย after Somalia attempted to auction off oil and gas blocks from disputed territory on the border between the two countries โ a flashpoint which resulted in the recall of the Kenyan ambassador and the tit-for-tat expulsion of the Somali diplomat in Nairobi. The Somali government responded by withdrawing the disputed blocks from sale, pending a judgement by the ICJ.
Learning from experience: Senegal and Equatorial Guinea
As Somalia wrestles with the question of how to benefit from its oil reserves while eschewing further strife, it has examples โ both good and bad โ among fellow African nations whoโve uncovered fossil fuel deposits.
Senegal, not historically an oil-producing nation, has been the site of a number of promising discoveries recently. Industry analysts haveย suggestedย that the Senegal Basin could be the โnext offshore boomโโparticularly likely following theย announcementย earlier this month that new, high-quality gas reserves have been discovered at the Greater Tortue Ahmeyim site straddling the Senegalese-Mauritanian border.
Senegal has alreadyย facedย some of the troubles which inevitably accompany rich petroleum finds. The African Energy Chamber has suggested that recent allegations that the Senegalese presidentโs brother improperly benefitted from the awarding of oil and gas contracts in fact stemmed from an attempt to taint the reputation of both President Macky Sall and the Senegalese fossil fuel industry in general.
Senegalโs oil hopes have not been derailed, however, and Dakar is making a concerted effort to reap the maximum benefit from its oil reserves. The countryโs newย petroleum code, voted into law earlier this year, hasย broughtย Senegalโs legal framework for natural resources in line with industry norms, increased transparency and upped the stateโs share of oil revenues.
If Dakar is so far managing to avoid the notorious โresource curseโ, other African countries flush with oil have not found the fuel to be such a boon.ย Equatorial Guineaย is practically a textbook example of a country squandering its oil reserves without returning tangible benefits to its citizens. In fact, while Equatorial Guineaโs per-capita wealth is the highest of any country in sub-Saharan Africa, government spending in areas like health and education are way below average.
Thatโs not to say some havenโt benefited from the oil millions: President Obiangโwho has ruled the country with an iron fist since he had his uncleย shotย and killed in 1979โ has managed to shore up the family coffers nicely, collecting race cars and mansions in Europe and America. Obiang onceย questionedย โwhat right does the opposition have to criticize the actions of a government?โ and spent his early years overseeing Black Beach, the mostย notoriousย prison in Africa.
Since Equatorial Guinea discovered oil, however, the despot has been more or less accepted by the international community. The once-shuttered U.S. Embassy in Malabo wasย reopenedย and former Secretary of State Condoleezza Rice referred to Obiang as โan old friendโ.
Somalia needs to tread carefully
The cases of Senegal and Equatorial Guinea, among others, offer Somalia guidance as it attempts to use its oil to further its progress towards peace and reconciliation. The involvement of US troops has helped to push back theย terrorist group al-Shabab, while the International Monetary Fund (IMF) has indicated that Somaliaย could qualify for debt reliefas early as next spring โ which would enable the government to plan public spending programmes and invest in job-creation schemes. However, regulators have cautioned that more needs to be done in the interim to tackle poverty and build a more resilient economy.
Against this backdrop, an oil boom could help Somalia rise to the challenges it faces. But itโs also possible that the influx of wealth could serve to fuel already-serious corruption. In the 2018 Corruption Perceptions Index (CPI),ย Somalia received the highest scoreย out of all 180 countries ranked, making it the most corrupt in the world. Tapping into oil revenues could help lift Somalis out of endemic povertyโalmost three-quarters of its population survive onย less than two dollars a dayโ but the vast cash flow this would release may also cause political corruption to thrive, as Equatorial Guinea has shown. Carefully managing any oil finds, as Senegal is trying to do, will be essential for Somalia to maintain recent progress.
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