Petroleum & Minerals

Validation of the PSAs to Coastline Exploration

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  1. Are the Petroleum agreements valid ? – NO. The Petroleum agreements are marred with serious irregularities considering the provisions of the Somali Petroleum Law and the Agreement on the Ownership, Management and Sharing of the Income from the Natural Resources. While it is true that the Petroleum Minister has the function to sign PSAs under Article 24 of the Petroleum Law, the Minister has no power to singlehandedly do so wrongly. First, Article 24 provides that PSA must be signed based on the recommendations of the Somali Petroleum Authority and not just by the single act of the Minister. Second, Article 4 of the Petroleum Law provides that ownership of the petroleum resources is vested in the Federal government and the Federal Member States collectively, while Article 5 provides that the Federal Government is the proprietor of the petroleum resources. By Article 7 of the Petroleum Law, the Petroleum resources are to be jointly managed by the Federal Government and the Federal Member States in line with Articles 2, 19.14 and 24.1 of the Agreement on the Ownership, Management and Sharing of the Income from the Natural Resources. Third, Article 2(35) of the Petroleum Law provides that the head of the executive is the Prime Minister and at a regional level, the head of the executives are the president. The Minister of Petroleum cannot act without a mandate of the Prime Minister and the presidents who are the heads of the governments in whom the ownership of the petroleum resources is vested. The Minster can also not be the only person in the government and where the Minister has acted without the mandate of the Federal Government, as he purported to do, the contracts are invalid and inconsequential. The questions that should be asked are: is there any sense in concluding the contract of a government with only one person who does not have the mandate of the government? Is there a reason contracts that will determine the destiny of the people should be shrouded in secrecy, even away from the heads of the government who have been side-lined? Is there anything to hide, that made it necessary to avoid the scrutiny of the Prime Minister and the president?
2.    Can the oil company challenge the government if it opposes the contracts?

Article July 30, 2022

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An overview of the mineral potential of Somalia

Abstract The mining sector of Somalia is still in its infancy stage with activity being predominantly artisanal in nature. However, Somalia has significant potential, and large proportions of its landmass have yet to be explored. Although mining activities in Somalia are minimal, the known mineral targets constitute less than 20%. The country has never had an overall geological and mineralogical survey. Past reconnaissance and exploration efforts were erratic; something here and something there and unfortunately that meagre data (though old) generated was lost during the civil war. The known mineral targets can be classified in these five main categories:

  1. Mining for precious and semi-precious minerals: Only artisanal miners are involved in this activity in their search for gold, diamond, platinum, and gemstones such as emerald, ruby, sapphire, tourmaline, and meteorites.
  2. Industrial mineral targets include phosphates, kaolin, bentonite, potash, lithium brines, sepiolite, talc, iguana, pegmatites, and quartz.
  3. Target ores: Iron (Fe), Copper (Cu), Zinc (Zn), rutile for Titanium, tin (Sb), gold (Au), and silver (Ag)
  4. Target energy minerals: These include uranium, lignite, coal, and hydrocarbons - oil and gas
  5. Mining for building materials and ornamental stones: Granite, limestone, marble, kaolin, and lime production
Author(s): Abdulkadir Abiikar Hussein August 15, 2018

21 Apr 2022 Petroleum & Minerals

Somali Petroleum should not be for sale due to political unrest in the country

The Parliament of the Federal Republic of Somalia enacts the petroleum law, taking into account the economic development and promoting investment in the country's natural resources. Pursuant to Articles 7(1), 44, [63(b), 69(1) (a)] and 79[(1) (d)] of the Constitution, the Petroleum Law is applicable throughout the Federal Republic of Somalia and its territories both offshore and onshore. Somalia Petroleum Law, article 4 approves that: “The Petroleum is a national asset which belongs to all the people of Somalia and shall be vested in the Federal Republic of Somalia and the Federal Member States, in trust for the people of Somalia”. Also, article 6 of the petroleum law approves that sharing of petroleum income as “petroleum income will be shared between the Federal State and the Regional Federal Member States in accordance with the “Agreement on ownership, Management and Sharing of the Country’s Natural Resource (petroleum and Minerals), in light of Article 44 of the Federal Provisional Constitution”.

29 Jul 2022 Petroleum & Minerals

Validation of the PSAs to Coastline Exploration

  1. Are the Petroleum agreements valid ? – NO. The Petroleum agreements are marred with serious irregularities considering the provisions of the Somali Petroleum Law and the Agreement on the Ownership, Management and Sharing of the Income from the Natural Resources. While it is true that the Petroleum Minister has the function to sign PSAs under Article 24 of the Petroleum Law, the Minister has no power to singlehandedly do so wrongly. First, Article 24 provides that PSA must be signed based on the recommendations of the Somali Petroleum Authority and not just by the single act of the Minister. Second, Article 4 of the Petroleum Law provides that ownership of the petroleum resources is vested in the Federal government and the Federal Member States collectively, while Article 5 provides that the Federal Government is the proprietor of the petroleum resources. By Article 7 of the Petroleum Law, the Petroleum resources are to be jointly managed by the Federal Government and the Federal Member States in line with Articles 2, 19.14 and 24.1 of the Agreement on the Ownership, Management and Sharing of the Income from the Natural Resources. Third, Article 2(35) of the Petroleum Law provides that the head of the executive is the Prime Minister and at a regional level, the head of the executives are the president. The Minister of Petroleum cannot act without a mandate of the Prime Minister and the presidents who are the heads of the governments in whom the ownership of the petroleum resources is vested. The Minster can also not be the only person in the government and where the Minister has acted without the mandate of the Federal Government, as he purported to do, the contracts are invalid and inconsequential. The questions that should be asked are: is there any sense in concluding the contract of a government with only one person who does not have the mandate of the government? Is there a reason contracts that will determine the destiny of the people should be shrouded in secrecy, even away from the heads of the government who have been side-lined? Is there anything to hide, that made it necessary to avoid the scrutiny of the Prime Minister and the president?
2.    Can the oil company challenge the government if it opposes the contracts?

30 Jul 2022 Petroleum & Minerals

Future Oil Development in Somalia

Amid the ongoing economic chaos around the world, the People of Somalia elected their President, Hassan Sheikh Mohamud, after a long-drawn election process that was delayed for over a year. Power was immediately transferred in early June 2022. Consequently, since the Petroleum Law was approved by the parliament, there was little progress in the Somali oil and gas industry during this period of uncertainty due to many enduring factors, for example, the lack of ministerial leadership and mismanagement; the absence of Somali industry experts on the decision making tables; poor decision making due to lack of expert knowledge; hiring foreigners to draft the Somali legal documentation, without proper scrutiny or supervision; and overall political instability throughout the country between the Federal Member States (FMSs) and the Central Government. Having said that, Somalia is one of the few frontier oil and gas exploration territories that still exist. Somalia’s offshore waters potentially hold at least 30 billion barrels of crude according to Spectrum Geo, a company that performed a seismic assessment of Somalia’s offshore basins in 2014-2015. Due to its large, potential offshore basin and other elements within the oil and gas industry with the right advanced offshore exploration and production technologies, Somalia is well-positioned to benefit from the current increase in oil prices. However, it would need to consider reviewing its legal documentation and create the right regulatory frameworks throughout the sector; to further review the most recent Profit Sharing Agreement (PSA) alongside the Revenue Sharing Agreement, and other issues within the industry including the separation of functions, and building the oil and gas industry structure such as creating Somali National Oil Company.

06 Aug 2022 Petroleum & Minerals