Somalia says will not cancel new oil contracts.

Somalia does not plan to nullify oil and gas exploration contracts made in recent years in favour of those that were signed prior to the toppling of the government in 1991, a senior state official said on Friday.

There are concerns by investors that deals signed by companies in Somalia could be affected now that it has a new government, after electing a new permanent president for the first time in over 20 years.

When the government of the Horn of African nation fell in 1991, around a dozen companies, including many multinational oil and gas majors, had licences to explore Somalia.

Abdullahi Dool, Somali‘s deputy energy minister, said it was too soon for the country to decide how it would handle a tangle of exploration licences, which grant various companies rights to explore overlapping areas.

Dool said the country would not only honour contracts signed prior to 1991 with oil majors including Royal Dutch Shell , BP and Chevron, but also new ones.

He criticised comments by Abdullahi Haider, a senior adviser to Somalia’s Ministry of Energy, that only oil licences agreed before 1991 would be upheld.

“I don’t know why Mr. Haider is making these noises … Government makes the policy, not advisers,” Dool told Reuters via telephone from Mogadishu.

Though interest in exploring for hydrocarbons in east Africa has been high recently, as a result of big oil and gas discoveries in neighbouring Kenya and other regional countries such as Uganda and Tanzania, Somalia has had a complicated relationship with companies looking to cash in on the boom.

In the past two decades, two semi-autonomous regions Puntland and Somaliland, have cropped up in the northern part of Somalia, and granted their own licences to explorers.

In some cases, they have awarded exploration contracts to separate companies to search the same swath of land.

Dool said any conflicting licence awards would be settled once a new Somali cabinet is in office by November 6.

“I’m sure all of this will be reviewed,” said Dool.

Independents, who have a high-risk tolerance and are small enough to cope with rapid change, such as Africa Oil and Horn Petroleum believe their contracts with regional Somali authorities will still remain valid.

“Horn Petroleum remains confident that our oil agreements continue to be valid,” said Keith Hill, chairman and CEO of Africa Oil and chairman of Horn Petroleum.

Source: Reuters

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