Oil exploration in Puntland

Somalia

This article is part of the series: Politics and government of Somalia

Transitional Federal Charter Executive Transitional Federal Government President Sharif Ahmed Prime Minister Abdiweli Mohamed Ali Ministry of Defense Military of Somalia Council of Ministers Legislative Transitional Federal Parliament List of MPs Judiciary Judiciary of Somalia States Puntland Oil exploration in Puntland Galmudug Maakhir Awdalland Hiiraan State Somaliland (de facto independent state) Politics of Somaliland States Regions and districts Elections Political parties Foreign relations Human Rights

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Several key players are involved in oil exploration in the Puntland region of Somalia:

• Amsas Consulting an energy and resource consulting firm based in Melbourne, Australia was the first company to get involved in Puntland in the mid 90's after most major oil companies declared force-Majeure.The company has done some study recently in Puntland in December 2008. The only repository of data is with this company headed by Dr.Ali Abdullahi a former Presidential candidate in the Federal and State elections of 2004 and 2008.He was also instrumental in the setting up of the state of Puntland in 1996-1998.He was also a former Special Adviser on Energy and resources and has worked with many International Corporations and governments in Africa.
• Africa Oil Corporation, formerly Canmex Minerals, an oil company based in Vancouver, British Columbia Canada.
• Range Resources Limited-^[1], a mineral exploration company based in Perth, Western Australia and Melbourne, Victoria, Australia
• Puntland State government of Somalia, where the Nogal and Dharoor blocks are located.
• Transitional Government of Somalia

Conoco and Phillips operations

In the early 1990s, Conoco and Phillips Petroleum (before they merged) had concessions in the Nogal valley. They drilled two unsuccessful wells before abandoning their concessions and evacuated their personnel upon the collapse of the Siad Barre government.

Consort Private gets rights in Puntland

Dharoor and Nogal Blocks

Consort Private Limited, a holding company operated by two Australian deal-brokers Terry Donnelly and Anthony Black, traveled to Puntland in April 2005 to tour the country and meet with Puntland leaders.

On June 10, 2005, Puntland president Mohamud Muse Hersi, planning and international cooperation minister Dr. Abdirahman Farole and Terry Donelly travel to Dubai, UAE to begin negotiations on a deal. Later during the trip, the Puntland delegation lands in Nairobi, Kenya to take part of Somali transitional federal government’s (TFG) relocation to Somalia. In Nairobi, it was reported that TFG President Abdullahi Yusuf (the previous and founding President of Puntland) and Puntland President Hersi became "angry" at each other because the TFG leadership refused to honor any agreement signed between a regional government (i.e. Puntland) and a foreign company.^[2]

The Puntland delegation went ahead anyways, returned to Dubai and signed an agreement on August 30, 2005 at the Hilton Dubai with Consort Private for exclusive rights to explore and drill for oil in the Nogal and Dharoor blocks. Two days prior to this, the Somali Prime Minister sent a warning to non-Somali companies that any oil deals would have to go through the federal government, not any state government (this despite the fact that Puntland was and is independent of the federal government in all but name).^[3]

While the details of the deal are known only to the four men who signed it, what is known is that following the deal, a number of Puntland ministers were added to the board of directors, and the government of Puntland by extension must have a sizeable (perhaps even controlling) share in Consort Private.^{[citation needed]}

Not to be put off so easily, Somali TFG President Abdullahi Yusuf, in an interview with the BBC on September 9, 2005, says that legally "natural resources belonging to the nation is the responsibility of the federal government". A few weeks later on September 29, 2005 a delegation from Puntland composed of ministers and businessmen travelled to the TFG's interim capital at Jowhar to led by finance minister Mohamed Yusuf "Gaagaab" to unsuccessfully negotiate again for Yusuf's signature on the deal.

Range Resources purchases exploration rights

Range Resources purchased 50.1% of Consort Private's exclusive rights to the Dharoor and Nogal blocks on October 5, 2005 in exchange for $2,500,000 USD in cash, 17 monthly payments of $200,000 USD, 85,000,000 shares of Range Resources stock and a further 85,000,000 stock options.^[4][5] In June 2006 the remaining 49.9% was purchased from Consort Private with the key assistance of Sir Sam Jonah, who became the non-executive chairman of Range^[6]

The deal had several terms, which hinged on certain conditions:

1. 6 month exclusive option to acquire Consort’s interest on the terms set out below with an option fee of 100,000,000 listed Range shares (RRS) and 50,000,000 stock options (RRSO) payable subject to any necessary shareholder approvals;
2. 750,000,000 Range ordinary fully paid shares, 375,000,000 stock options (unlisted, $0.05 USD, expiring October 1, 2010) and $10,000,000 USD conditional on shareholder approval and the completion of a minimum $25,000,000 USD capital raising;
3. A further payment of 750,000,000 Range ordinary fully paid shares, 375,000,000 stock options (unlisted, $0.05 USD, expiring October 1, 2010) and $20,000,000 USD conditional on shareholder approval and upon completion of the first hydrocarbon well drilled in Puntland;
4. 2.5% net royalty on the Puntland Projects;

Range Resources issued a press release the same day stating that the TFG had signed off on the deal. The Prime Minister of the TFG, Ali Mohamed Gedi, fired back less than a week later on October 16, 2005, refuting this claim in a letter to the Australian Stock Exchange, where Range Resources is traded.

On November 2, 2005, Ali Mohamed Gedi finally accepted an "amendment of contract" between Puntland and Range, removing the last legal hurdle between Range and exploration. Range Resources does not have agreement from the traditional leaders and the civil society organizations of the SSC regions - where most of the oil prospecting is taking place. From a legal standpoint, it does not appear to need it.^{[citation needed]}

Criticism

The manner in which Puntland and their partners (Range Resources LTD, Canmex/African Oil Corp and other linked parties) have explored for minerals, oil and gas in the Dharoor and Nugaal valley has drawn criticism both within Puntland, Somalia and in the diaspora. Somalia is a patchwork of overlapping administrations, clans and traditional authorities, which in Puntland includes the Transitional Government, the Puntland Government, various traditional Harti clan leaders, and individual loyalties to a particular warlord or business leader. The President of Puntland has chosen to place himself above all these other authorities within Puntland, and critics claim the oil, mineral and gas exploration in Puntland has become an engine empowering conflict and war in northern Somalia. Since exploration began, this has spawned Puntland's war with Somaliland, Maakhir's purported break with Puntland, Somaliland's war with Maakhir, gun-battles outside of the Puntland State legislature, and a great deal of political uncertainty.^{[citation needed]}

The Northern Somali Unionist Movement (NSUM), a Somali organization of unclear size or influence, claiming members and supporters from Sool, Sanaag and Cayn regions in the northern regions of Somalia, which are thought to contain some of Somalia's most promising geology oil wise, has issued a warning^[7] to mineral and oil companies that they view their agreements with the Puntland and Transitional governments to be illegitimate and non-binding.

Exploration problems and political instability

On February 26, 2006 the Puntland Parliament faced a confidence vote on President Hersi's Council of Ministers. Heated argument and disputes in the parliament turned ugly, and by the next day at least three armed men were reported dead near Garowe's Parliament House.^{[citation needed]} The Puntland minister of planning and international cooperation, a key player in the negotiations with Consort Private and chief opponent of Range Resources/Africa Oil Corp. deal, Dr. Abdirahman Farole,

Canmex/Africa Oil Corp. gets involved

A Memorandum Of Understanding (MOU) signed on October 10 2006 between Canmex Minerals, Range and Puntland granted Canmex an 80% interest in the "licenses and operatorship" of the Dharoor and Nogal blocks, contingent upon:

1. Canmex to pay to Range a signing bonus in the aggregate amount of $5,000,000 USD within 10 days of signing the agreement^[8]
2. The financial commitment over an initial four year period of $50,000,000 USD in exploration expenditures; and
3. The payment to Range of an additional $3,500,000 USD upon commencement of commercial production

With the signing bonus paid, and with approval of the Puntland parliament, Range, Puntland and Canmex hammered out a Production Sharing Agreement on January 23, 2007, that confirmed the terms of the MOU signed in October.^[9]

In order to meet their financial obligations, Canmex sold 4,000,000 common shares in a non-brokered private placement in order to raise $20,000,000 USD.^[10]

Canmex officially renamed itself Africa Oil Corp. (AOI.V) on August 20, 2007.

PM Gedi and the TFP battle President Yusuf

In November 2006, while the TFG was besieged by Islamist armies in Baidoa and Ethiopia was preparing to invade the Union of Islamic Courts, President Yusuf traveled to the headquarters of the PRC's state-owned China National Offshore Oil Corporation (CNOOC) as well as the smaller China International Oil and Gas (CIOG) Group to ratify a deal with the oil group's chairman and chief executive officer, Fu Chengyu.

Seven months later, in Nairobi, TFG Energy Minister Abdullahi Yusuf Mohamad met with Chen Zhuobiao, head of CNOOC operations in Africa, and Judah Jay, managing director of CIOG, to create the final agreement, which was signed by President Abdullahi Yusuf on July 18, 2007. The agreement gave CNOOC exclusive rights to the large offshore blocks off the coast of Mudug, for an undisclosed sum of money and unknown terms.^[11]

Prime Minister Gedi decided to get in on all this action himself, and backtracked on his previous, lukewarm endorsement of Puntland's oil exploration agreement and instead proposed a draft law in the Transitional Federal Parliament in August 2007 that would nullify all agreements made after 1991 (when the last functional national government collapsed and the oil companies with existing concessions declared Force Majeure) thus giving the TFG free rein to resell all the exploration rights in the country. The exploration rights for all of Somalia would be sold to Indonesia’s PT Medco Energi Internasional Tbk and the Kuwait Energy Company, and a National Oil Company of Somalia would be created, controlled by Gedi and parliament.

This directly confronted President Yusuf's deal with CNOOC, and so the two went to political war with each other, leading to Gedi's forced resignation after more than two months of backroom warfare, on October 29 2007.^{[citation needed]}

Uncertainty as exploration begins

Range and Africa Oil completed their initial survey of the Dharoor and Nogal basins in September 2007, as well as a full seismic survey of Nogal. Mobilization for drilling in Nogal and a seismic analysis of Dharoor began immediately during the winter of 2007.^[12]

On December 12, 2007 the Puntland Minister of Fisheries and Ports Said Mohamed Rage resigned from parliament after a long dispute with President Hersi. Central to the feud was President Hersi's micromanagement of Bosaso port, which was supposed to be his domain, but also the resource agreement with Range and Africa Oil, which he opposed. A month earlier on November 22 2007, a Range team left the village of Buru after Said Mohamed Rage's clan asked for payment for it to remain there and the Hersi's government discouraged such payment.

President Hersi reshuffled his cabinet on December 16 2007 and created a new ministry of Oil and Resources, placing Hassan "Alore" Osman in charge of the ministry.^[13]

TFG President Abdullahi Yusuf was hospitalized in London, England shortly thereafter, and there the issue rested until the president checked out of his London hospital room on February 3, 2008^[14]. Before flying to Baidoa, President Yusuf landed in Addis Ababa on February 5, 2008 to meet with the Ethiopian government and also with Puntland President Hersi regarding the TFG's stance on the Puntland-Range-Africa Oil deal. President Hersi was also in Addis Ababa to meet with the Ethiopian government regarding the perceived relaxed attitude of Puntland towards Somali rebel groups using Bosaso port^[15].

Drilling rig construction contracted to Southeast Asia, China

Africa Oil Corp. signed a contract on February 19, 2008 with Energi Tata Persada Pte Ltd (ETP), a Singaporean registered company, for construction of the first drilling rig. ETP is a wholly owned subsidiary of Catur Khita Persada of Indonesia. Construction commenced on ETP rig No.3 at the Shengli fabrication plant in Dongying, China commenced shortly after the contract was signed.

According to the press release:

The ETP rig is scheduled for delivery in mid May, 2008 and will immediately mobilize to Jebel Ali, Dubai. The mobilization into Somalia will be via chartered vessel and the current plan is to spud the first well during July.

The ETP No 3 is a 1,500 HP unit, equipped with the latest drilling technology, including a top drive and three 1,600 HP pumps. The camp facility will house up to 150 persons and will also be brand new. ETP will also provide the trucking and hoisting equipment as part of their contractual obligations.^[16]

Security

Africa Oil and Range Resources employed a number of government troops to provide security for their ongoing seismic operation. A number of unarmed western security advisers were also employed on the ground in Puntland.

Somaliland Invasion of Sool

The region of Sool, which contains the majority of the Nugaal block, was invaded by Somaliland forces in late 2007, an invasion that captured virtually all of the region save for the enclave of Cayn by 2009. Puntland issued extremely confident-sounding declarations that they would recapture Sool any minute, "massive armies were mustering", etc, though by springtime 2008 it was clear that Somaliland was not going anywhere anytime soon. In April 2008, Africa Oil announced that as a result of the "deterioration of the security situation in parts of Somalia" the implementation of the Nugaal drill program would be delayed^[17]. As they could not explore the actual area itself, the company instead purchased 2D survey data from the 1980s of the Nugaal Valley to analyze.

References

1. ^ Not to be confused with Texas based Range Resources Corporation.
2. ^ "Puntland Agreement" controversy: Chronology of events (UPDATE!)
3. ^ Somaliland Times issue 196
4. ^ Puntland Oil Exploration part 1
5. ^ ASX Announcement - Puntland 05.10.05
6. ^ ASX Announcement, Puntland Update
7. ^ ::Xargaga Online::
8. ^ Range Resources
9. ^ Canmex Announces Formal Signing of Production Sharing Agreement
10. ^ Canmex Announces Cdn $20 Million Private Placement.
11. ^ China's Play for Somalia's Oil
12. ^ Africa Oil Corp. Q3 2007 Financial Statement
13. ^ Puntland minister resigns, accuses president of 'power abuse'
14. ^ President Leaves London Hospital
15. ^ Puntland leader seeks Somali president's approval for oil contract
16. ^ Africa Oil Corp. Operations Update
17. ^ ANNUAL INFORMATION FORM