Stratigraphy and Petroleum Prospects of Northern Somalia
SALAD HERSI, O., Quebec Geoscience Center,
Ste-Foy, QC; and HILOWLE MOHAMED, A., Department of Earth Sciences,
Carleton University, Ottawa, ON
The sedimentary cover of Northern Somalia includes
post-Triassic continental and marine strata which accumulated in
basins related to the disintegration of the Gondwanaland. Among
these, the Berbera and Ahl Mado basins are the most important basins
stratigraphically and hydrocarbon potential. Sedimentation in both
basins begins with a Jurassic continental sandstone (Adigrat
Formation) overlain by interbedded units of shallow marine
limestones and shales (Bihendula sequence) in the Berbera Basin, and
limestone-dominated strata with minor shale and sandstone interbeds
(Ahl Mado Group) in the Ahl Mado Basin. The Cretaceous section,
unconformable with the Jurassic sequence, is mainly continental (Yesomma
Sandstone) in the Berbera Basin, but becomes shallow-marine, sandy
to pure limestone with subordinate sandstone and shale (Tisje
Formation) in the Ahl Mado Basin. By the end of the Cretaceous
Period, a westward marine transgression permitted shallow-marine,
Paleocene - lower Eocene limestone (Auradu Formation) deposition
throughout northern Somalia. This is succeeded by thick anhydrite
strata (Taleh Formation) overlain by Middle to Late Eocene
shallow-marine limestone (Karkar Formation). The later is the
youngest stratigraphic unit straddling the Gulf of Aden. Younger
strata of syn- and post-rifting, continental to shallow-marine
origin are confined in discrete basins along the coast of the gulf.
Based on published and unpublished data, the
geology of these basins proves that oil and gas have been generated
with favorable reservoirs, as well as structural and stratigraphic
traps. Moreover, continuation of these basins across the gulf,
matching the hydrocarbon-producing Marib-Hajar and Say'un-Al Masila
basins of Yemen, raises the hydrocarbon prospect of northern Somalia.
ABSTRACTS - ASSOCIATION
OF AMERICAN PETROLEUM GEOLOGISTS (AAPG) EASTERN SECTION 2000
Copyright 1993 The Times Mirror Company
January 18, 1993
Los Angeles Times
THE OIL FACTOR IN SOMALIA
FOUR AMERICAN PETROLEUM GIANTS HAD
AGREEMENTS WITH THE AFRICAN NATION BEFORE ITS CIVIL WAR BEGAN. THEY
COULD REAP BIG REWARDS IF PEACE IS RESTORED
By MARK FINEMAN
DATELINE: MOGADISHU, Somalia
Far beneath the surface of the tragic drama of
Somalia, four major U.S. oil companies are quietly sitting on a
prospective fortune in exclusive concessions to explore and exploit
tens of millions of acres of the Somali countryside.
That land, in the opinion of geologists and
industry sources, could yield significant amounts of oil and natural
gas if the U.S.-led military mission can restore peace to the
impoverished East African nation.
According to documents obtained by The Times,
nearly two-thirds of Somalia was allocated to the American oil
giants Conoco, Amoco, Chevron and Phillips in the final years before
Somalia's pro-U.S. President Mohamed Siad Barre was overthrown and
the nation plunged into chaos in January, 1991. Industry sources
said the companies holding the rights to the most promising
concessions are hoping that the Bush Administration's decision to
send U.S. troops to safeguard aid shipments to Somalia will also
help protect their multimillion-dollar investments there.
Officially, the Administration and the State
Department insist that the U.S. military mission in Somalia is
strictly humanitarian. Oil industry spokesmen dismissed as
"absurd" and "nonsense" allegations by aid
experts, veteran East Africa analysts and several prominent Somalis
that President Bush, a former Texas oilman, was moved to act in
Somalia, at least in part, by the U.S. corporate oil stake.
But corporate and scientific documents disclosed
that the American companies are well positioned to pursue Somalia's
most promising potential oil reserves the moment the nation is
pacified. And the State Department and U.S. military officials
acknowledge that one of those oil companies has done more than
simply sit back and hope for pece.
Conoco Inc., the only major multinational
corporation to mantain a functioning office in Mogadishu throughout
the past two years of nationwide anarchy, has been directly involved
in the U.S. government's role in the U.N.-sponsored humanitarian
Conoco, whose tireless exploration efforts in
north-central Somalia reportedly had yielded the most encouraging
prospects just before Siad Barre's fall, permitted its Mogadishu
corporate compound to be transformed into a de facto American
embassy a few days before the U.S. Marines landed in the capital,
with Bush's special envoy using it as his temporary headquarters. In
addition, the president of the company's subsidiary in Somalia won
high official praise for serving as the government's volunteer
"facilitator" during the months before and during the U.S.
Describing the arrangement as "a business
relationship," an official spokesman for the Houston-based
parent corporation of Conoco Somalia Ltd. said the U.S. government
was paying rental for its use of the compound, and he insisted that
Conoco was proud of resident general manager Raymond Marchand's
contribution to the U.S.-led humanitarian effort.
John Geybauer, spokesman for Conoco Oil in
Houston, said the company was acting as "a good corporate
citizen and neighbor" in granting the U.S. government's request
to be allowed to rent the compound. The U.S. Embassy and most other
buildings and residential compounds here in the capital were
rendered unusable by vandalism and fierce artillery duels during the
clan wars that have consumed Somalia and starved its people.
In its in-house magazine last month, Conoco
reprinted excerpts from a letter of commendation for Marchand
written by U.S. Marine Brig. Gen. Frank Libutti, who has been acting
as military aide to U.S. envoy Robert B. Oakley. In the letter,
Libutti praised the oil official for his role in the initial
operation to land Marines on Mogadishu's beaches in December, and
the general concluded, "Without Raymond's courageous
contributions and selfless service, the operation would have
But the close relationship between Conoco and the
U.S. intervention force has left many Somalis and foreign
development experts deeply troubled by the blurry line between the
U.S. government and the large oil company, leading many to liken the
Somalia operation to a miniature version of Operation Desert Storm,
the U.S.-led military effort in January, 1991, to drive Iraq from
Kuwait and, more broadly, safeguard the world's largest oil
"They sent all the wrong signals when Oakley
moved into the Conoco compound," said one expert on Somalia who
worked with one of the four major companies as they intensified
their exploration efforts in the country in the late 1980s.
"It's left everyone thinking the big question
here isn't famine relief but oil -- whether the oil concessions
granted under Siad Barre will be transferred if and when peace is
restored," the expert said. "It's potentially worth
billions of dollars, and believe me, that's what the whole game is
starting to look like."
Although most oil experts outside Somalia laugh at
the suggestion that the nation ever could rank among the world's
major oil producers -- and most maintain that the international aid
mission is intended simply to feed Somalia's starving masses -- no
one doubts that there is oil in Somalia. The only question: How
"It's there. There's no doubt there's oil
there," said Thomas E. O'Connor, the principal petroleum
engineer for the World Bank, who headed an in-depth, three-year
study of oil prospects in the Gulf of Aden off Somalia's northern
"You don't know until you study a lot further
just how much is there," O'Connor said. "But it has
commercial potential. It's got high potential . . . once the Somalis
get their act together."
O'Connor, a professional geologist, based his
conclusion on the findings of some of the world's top petroleum
geologists. In a 1991 World Bank-coordinated study, intended to
encourage private investment in the petroleum potential of eight
African nations, the geologists put Somalia and Sudan at the top of
the list of prospective commercial oil producers.
Presenting their results during a three-day
conference in London in September, 1991, two of those geologists, an
American and an Egyptian, reported that an analysis of nine
exploratory wells drilled in Somalia indicated that the region is
"situated within the oil window, and thus (is) highly
prospective for gas and oil." A report by a third geologist, Z.
R. Beydoun, said offshore sites possess "the geological
parameters conducive to the generation, expulsion and trapping of
significant amounts of oil and gas."
Beydoun, who now works for Marathon Oil in London,
cautioned in a recent interview that on the basis of his findings
alone, "you cannot say there definitely is oil," but he
added: "The different ingredients for generation of oil are
there. The question is whether the oil generated there has been
trapped or whether it dispersed or evaporated."
Beginni 1986, Conoco, along with Amoco, Chevron,
Phillips and, briefly, Shell all sought and obtained exploration
licenses for northern Somalia from Siad Barre's government. Somalia
was soon carved up into concessional blocs, with Conoco, Amoco and
Chevron winning the right to explore and exploit the most promising
The companies' interest in Somalia clearly
predated the World Bank study. It was grounded in the findings of
another, highly successful exploration effort by the Texas-based
Hunt Oil Corp. across the Gulf of Aden in the Arabian Peninsula
nation of Yemen, where geologists disclosed in the mid-1980s that
the estimated 1 billion barrels of Yemeni oil reserves were part of
a great underground rift, or valley, that arced into and across
Hunt's Yemeni operation, which is now yielding
nearly 200,000 barrels of oil a day, and its implications for the
entire region were not lost on then-Vice President George Bush.
In fact, Bush witnessed it firsthand in April,
1986, when he officially dedicated Hunt's new $18-million refinery
near the ancient Yemeni town of Marib. In remarks during the event,
Bush emphasized the critical value of supporting U.S. corporate
efforts to develop and safeguard potential oil reserves in the
In his speech, Bush stressed "the growing
strategic importance to the West of developing crude oil sources in
the region away from the Strait of Hormuz," according to a
report three weeks later in the authoritative Middle East Economic
Bush's reference was to the geographical choke
point that controls access to the Persian Gulf and its vast oil
reserves. It came at the end of a 10-day Middle East tour in which
the vice president drew fire for appearing to advocate higher oil
and gasoline prices.
"Throughout the course of his 17,000-mile
trip, Bush suggested continued low (oil) prices would jeopardize a
domestic oil industry 'vital to the national security interests of
the United States,' which was interpreted at home and abroad as a
sign the onetime oil driller from Texas was coming to the aid of his
former associates," United Press International reported from
Washington the day after Bush dedicated Hunt's Yemen refinery.
No such criticism accompanied Bush's decision late
last year to send more than 20,000 U.S. troops to Somalia, widely
applauded as a bold and costly step to save an estimated 2 million
Somalis from starvation by opening up relief supply lines and
pacifying the famine-struck nation.
But since the U.S. intervention began, neither the
Bush Administration nor any of the oil companies that had been
active in Somalia up until the civil war broke out in early 1991
have commented publicly on Somalia's potential for oil and natural
gas production. Even in private, veteran oil company exploration
experts played down any possible connection between the
Administration's move into Somalia and the corporate concessions at
"In the oil world, Somalia is a fringe
exploration area," said one Conoco executive who asked not to
be named. "They've overexaggerated it," he said of the
geologists' optimism about the prospective oil reserves there. And
as for Washington's motives in Somalia, he brushed aside criticisms
that have been voiced quietly in Mogadishu, saying, "With
America, there is a genuine humanitarian streak in us . . . that
many other countries and cultures cannot understand."
But the same source added that Conoco's decision
to maintain its headquarters in the Somali capital even after it
pulled out the last of its major equipment in the spring of 1992 was
certainly not a humanitarian one. And he confirmed that the company,
which has explored Somalia in three major phases beginning in 1952,
had achieved "very good oil shows" -- industry terminology
for an exploration phase that often precedes a major discovery --
just before the war broke out.
"We had these very good shows," he said.
"We were pleased. That's why Conoco stayed on. . . . The people
in Houston are convinced there's oil there."
Indeed, the same Conoco World article that praised
Conoco's general manager in Somalia for his role in the humanitarian
effort quoted Marchand as saying, "We stayed because of
Somalia's potential for the company and to protect our assets."
Marchand, a French citizen who came to Somalia
from Chad after a civil war forced Conoco to suspend operations
there, explained the role played by his firm in helping set up the
U.S.-led pacification mission in Mogadishu.
"When the State Department asked Conoco
management for assistance, I was glad to use the company's influence
in Somalia for the success of this mission," he said in the
magazine article. "I just treated it like a company operation
-- like moving a rig. I did it for this operation because the (U.S.)
officials weren't familiar with the environment."
Marchand and his company were clearly familiar
with the anarchy into which Somalia has descended over the past two
years -- a nation with no functioning government, no utilities and
few roads, a place ruled loosely by regional warlords.
Of the four U.S. companies holding the Siad Barre-era
oil concessions, Conoco is believed to be the only one that
negotiated what spokesman Geybauer called "a standstill
agreement" with an interim government set up by one of
Mogadishu's two principal warlords, Ali Mahdi Mohamed. Industry
sources said the other U.S. companies with contracts in Somalia
cited "force majeure" (superior power), a legal term
asserting that they were forced by the war to abandon their
exploration efforts and would return as soon as peace is restored.
"It's going to be very interesting to see
whether these agreements are still good," said Mohamed Jirdeh,
a prominent Somali businessman in Mogadishu who is familiar with the
oil-concession agreements. "Whatever Siad did, all those
records and contracts, all disappeared after he fled. . . . And this
period has brought with it a deep change of our society.
"Our country is now very weak, and, of
course, the American oil companies are very strong. This has to be
handled very diplomatically, and I think the American government
must move out of the oil business, or at least make clear that there
is a definite line separating the two, if they want to maintain a
long-term relationship here."
Fineman, Times bureau chief in Nicosia, Cyprus,
was recently in Somalia.
Copyright Petroleum Economist Ltd.
Petroleum Economist. Vol 58, Issue n10, Oct, 1991, p19(2).
Oil Hopes Hinge on North Somalia
A UN-funded study points to oil potential in Ethiopia and
Somalia. Maria Kielmas talked to emerging rulers in the region about
their oil policies.
Wars in countries comprising the Horn of Africa
put on hold the first real spark of international industry interest
in the region's oil prospects. As a variety of political factions
wrestle for control in Ethiopia and Somalia, only one group, the
Somali National Movement (SNM), which controls the self-proclaimed
Republic of Somaliland in northern Somalia, has maintained a
positive policy towards foreign oil investment.
Aside from the political conflict, oil exploration
in the African Horn has generally been neglected because of a
widespread perception throughout the industry that the region is
gas-prone and both inaccessible and expensive to explore. The
countries around the Gulf of Aden and Red Sea are regarded as too
poor to afford the necessary infrastructure for gas development.
In an attempt to address the balance and provide a
more considered view of petroleum potential, the World Bank and
United Nations Development Programme (UNDP) devised a regional
hydrocarbon study of the countries bordering the Red Sea and Gulf of
Aden. Financed by the UNDP, in co-operation with the governments of
France, Britain and Canada, and several oil companies, the study
began work in 1988. All the countries along this coastline
participated from the outset, although Saudi Arabia has since
dropped out, claiming it has its own plans for Red Sea exploration.
The study managed to collect all relevant
technical information from both Ethiopia and Somalia before this
year's fighting broke out. Results of analysis to date, which
indicate that the region is definitely oil-prone as well as
gas-prone, are to be presented at this month's meeting of the
American Association of Petroleum Geologists, Eastern Hemisphere
group, in London.
Regional connoisseurs pick out northern Somalia as
particularly prospective. Exploration here dates from the turn of
the century and was conducted in the former colony of British
Somaliland and was conducted by British and Italian geologists. The
area rewarded explorers with numerous oil seeps and gas shows in
wells drilled in the 1960s. It is geologically analogous, in parts,
to southern Yemen, on the other side of the Gulf of Aden, and almost
the entire area was under licence to companies by the time
hostilities with the central government broke out in 1988.
All of the oil companies operating in the area at
the time - Amoco, Chevron, Agip and Conoco - declared force majeure,
but the separatist rebel group, the SNM, maintained contact with
them. The companies' view, expressed privately, was that if a
separate northern Somali state could provide the usual
internationally-acceptable contract conditions, then, in principle,
they would be prepared to resume work when it was safe.
The "Republic of Somaliland" corresponds
" to the last mile" to the territory of British
Somaliland, SNM spokesmen say. But this boundary cuts through
permits held by Agip and Conoco. Currently under the control of the
SNM the area is reportedly enjoying a degree of peace unheard of
since the beginning of deposed president Siyad Barre's rule more
than 20 years ago. The core of the peace is a deal struck between
the mainly Isaaq clan of SNM and minority Warsengeli, Dulbahante and
Talks with oil firms
The SNM also claims it has reached a tentative
agreement with oil companies. Espousing pro-market policies, SNM
spokesmen say they are committed to a mixed economy and foreign
investment. All foreign companies are welcome to explore in the
territory on condition that they do not prevent other companies from
doing the same. But one of main problems to overcome before any work
can begin is the clearing of more than one million land mines
planted by the Mogadishu forces.
The SNM has received tacit support from Yemen,
where it has an office and where it has met up with oil company
officials. SNM officials are now in the process of drafting their
own petroleum contract terms, but, inexplicably, have no access to
existing contract wordings issued by the ousted Barre government.
Yet to be recognised
Regional analysts believe that attempts to
consolidate a separate northern state could be scuppered by Saudi
Arabia, a country which has never shown much enthusiasm for oil
development in noughbouring states. The Arab League has shown little
desire for a new, separate country either. The Republic of
Somaliland has yet to be recognised by any other state, but some
observers feel this could happen by default, since it at least
functions, while no other part of Somalia works at all.
Representative from the United Somali Congress (USC),
nominally in charge in Mogadishu, have also met with oil company
officials, in particular Conoco, both in Somalia and in Rome.
However, no news of any agreement has emerged from these meetings.
Pectin is the biggest licence holders in Somalia proper, with four
offshore blocks along the Indian Ocean shelf, extending
approximately from Bander Beyle to south of Mogadishu. Further
onshore blocks are held by Amoco and Phillips.
Although new petroleum legislation was passed in
1984, it took Ethiopia until 1989 to award the first licences to
foreign companies. Last year, the Mengistu government awarded two
permits in the Ogaden province to US companies Maxus Energy and Hunt
Oil. Maxus acquired a 110 800-square km area close to the northern
Somali border, comprising four adjacent blocks, while Hunt signed up
for a 44 000-square km area in the southern Ogaden, abutting Kenya
The government reserves for itself an area around
the Calub gasfield - discovered by Tenneco in 1974 and where
reserves are thought to be about one trillion cubic feet -
continuing appraisal work with Soviet help. Vancouver-based
International Petroleum acquired the 34 000 square km Danakil Block
along the Eritrean coast, farming out 60% and the operatorship to
Amoco. Offshore, British Petroleum holds one area of 31 000 square
km and was on the point of acquiring another block further north
when the fighting escalated. All work halted as the war spread on
land and BP declared force majeure last summer, when one of its
seismic boats was fired on by rebels from the Eritrean Peoples'
Liberation Front (EPLF).
The exact legal status of contracts signed with
the defunct Mengistu government is unclear. This problem is further
exacerbated by an emerging statist policy on the part of the various
Ethiopian and Eritrean groups. Most pundits predict that after the
Eritrean referendum in two years' time, a loose Ethiopian
confederation will emerge, allowing the Addis Ababa government
continued access to the Red Sea ports of Asab and Massawa.
The new rulers in Addis Ababa, the Ethiopian
Peoples' Revolutionary Democratic Front (EPRDF), and EPLF in
Eritrea, say their first priority is to tackle famine relief and
food shortages. But whatever stability exists, it is threatened by
continued squabbling between factions divided on ethnic, religious
and ideological lines. Notwithstanding public rhetoric about dumping
their various Marxist ideologies, the EPRDF and the Tigrayan
Peoples' Liberation Front, which has been enjoying a measure of US
support, remain dominated by former university students still
committed to the notion of a centralised, command economy.
In this climate, it is unlikely that there will be
any quick decision about oil company contracts, even if the
stability holds. And if a decision does materialise, it is unlikely
to be very favourable to the foreign companies. However, the most
recent reports indicate that some Somali and Oromo groups within
Ethiopia, which have embraced the same pro-market policies as the
SNM in Somaliland, are emerging as power brokers. They may hold the
balance between religious and ethnic divisions in the country.
Copyright (c) 1993 , EMA Business Information.
Reprinted by permission.
Middle East Economic Digest, 2 April
Somaliland: Hopes and hype on the new frontier
Geologists have speculating about the possibility
of oil in Somalia since the last century, but it took the US
military Operation Restore Hope to bring this possibility to popular
attention. The widespread notion that US troops are sent to Somalia
to protect the interests of US oil companies, and their supposed
huge oil finds, has been treated with amused derision in oil
industry circles. But US military presence which aims to stabilise
events in a region increasingly regarded as the backyard of its
regional ally, Saudi Arabia, has not been discounted . Over the past
l0 years most of the oil industry interest has focused on areas in
the north, today the self-declared Republic of Somaliland, which
troops have avoided. Any future oil exploration here will depend
largely on the international community's recognition of the
aspirations of the breakaway state.
Oil seeps were first identified by Italian and
British geologists who surveyed the area during the colonial era.
These predicted the presence of a sizable oil field just south of
Berbera. But it took until the 1960s for the first wells to be
drilled here. Three wells known as the Daga Shabell series,
regisrered oil shows, but there was no real discovery . There were
further small gas discoveries along the east coast and just offshore
of Socotra, but nothing of commercial proportions.
Interest in this part of Somalia resumed in the
mid-1970s to early 1980s when high oil prices gave oil companies a
lot of cash to spend on exploration. A huge concession over northern
Somalia, known as the Duban conscession , was awarded in 1980 to a
consortium comprising two privately owned US oil companies , the
Dallas-based Hunt Oil Company and the Houston-based Quintana Oil
Company. These tried unsuccessfully for two years to interest other
industry partners to explore the region but eventually were obliged
to relinquish the concession. Hunt continued exploring in Yemen and
discovered the Alif field while Quintana, which is owned by the
Cullen banking family, cut down all its international exploration
and concentrated on operating the south Texas Tom O'Connor oil field
which produces its principal cash flow.
The discovery of oil in Yemen inspired furthel
industry interest in Somalia. There are geological similarities
between south Yemen and north Somalia, but geologists warn that the
analogy cannot be taken too far. Since south Arabia and the of Horn
of Africa were once geologically connected, certain structural
trends are traceable from one side of the Gulf of Aden to the other.
There is no evidence yet to support speculation that a mirror image
of Yemen's Alif fields will be found in Somalia, but this cannot be
discounted either. However an idea which has spread among some
Somali officials that their country holds oil fields similar to
those in Saudi Arabia is nonsensical.
By the mid-1980s, one third of the country was
under licence and, in the north, all but one permit had been
awarded. The old Hunt/ Quintana concession was divided into two with
one part awarded to Chevron and the other to a partnership of Amoco
and Canada's International Petroleum Corporation, which has its
technical headquarters in Dubai. Philips and Agip also held
concessions, but the greatest undertaking was Conoco's. Conoco has
been exploring in Somalia since the 1970s and holds six permits in
the north. Just before the civil war broke out in 1988 there were
rumours that it had made a significant oil discovery close to the
Conoco officials acknowledge that they have always
maintained contact with all the at warring sides in the Somali war.
One inspired action fuelling the latest conspiracy theories was that
the Conoco manager in Mogadishu allowed US troops to use the company
office. The conspiracy theorists cited this as proof that the US is
protecting its oil companies and promoting oil interests. Oil
executives say it is common sense for any company in all unstable
country to make friends with the prevailing 'good guys ".
"When the US troops leave and another set of troops replaces
them he will probably invite those in too, if he has any
sense," was one company response.
When some degree of peace was restored in the
north following its unilateral breakaway in 1991, Somaliland
president Abduirahman Ahmed Ali said that Conoco had visited
Somaliland several times and as as planning to open an office in
Hargeisa. The Hargeisa government invited the other oil companies
with concessions in the north for talks at the same time, but these
initiatives have almost ground to a halt. The breakaway republic is
not recognized internationally and its grip of the Hargeisa
government has weakened in the face of increasing unrest. However,
the companies are not relinquishing their concessions, and their
executives say that they remain ready to resume work in Sornaliland
as soon as it is safe to do so. For its part, the Hargeisa
government has said it will honour until their expiry the existing
contracts which foreign companies signed with the former government
of Siad Barre, while at the same time drafting its
own , new petroleum legislation.
A project to establish a national oil company is being
coordinated from Riyadh
But in September 1992 a never development emerged
which may influence the situation further. A project is under may to
establish a Somali state oil company to be known as the Somali
National Petroleum (SNPC). This is being coordinated by Omar Arteh
Ghalib, who was prime minister in the provisional government of Ali
Mahdi Mohamed. Ghalib is now based in Riyadh running a consultancy
firm called the Nort Petroleum Development Corporation. Ghalib has
told oil company executives that he is the only Somali politician to
have kept up contacts with all opposing sides in the country and
that he sees himself as a future president. This views is not shared
by his compatriots in the Issak tribe, based in the north, who see
him as a traitor. Nor is the northern government interested in the
formation of the proposed SNPC, and its officials insist that there
will never be a united Somalia again.
The creation of SNPC is being assisted by a former
Saudi Aramco exploration manager, Moudjahid al-Husseilli, now based
in Bahrain, and the London -based International Engineering
Consultants. The Saudi connec tion is viewed within the oil sector
as continuation of the kingdon' s interest in targeting potential
oil projects in the Horn of Africa. This started in the mid-1980's
in the face of competition from Iran, but has so far been without
any result. Private Saudi investors has at various times proposed
refining projects in Somalia, Djibouti and Ethiopia. Somalia's only
refinery, a 10,000 barrel-a-day plant outside Mogadishu, was a
jointly developed with Iran and started operating in 1979. In the
mid-1980s, there were plans for it to be upgraded by Romanian
engineers using Saudi finances but these never materialised.
Nevertheless, Saudi Arabia's stance is seen as
crucial to the future of Somalia's oil sector, , if and when peace
comes. The signals from Riyadh have been mixed. Saudi Arabia did,
not participate in the World Bank/UN Development Programme study of
the petroleum potential of the Red Sea and Gulf of Aden area - a
three-year international project between the regional governments.
Canada, some European states and a number of Western oil ompanies.
At the time, the Saudis said that they preferred to develop their
own oil and gas resources in their part of the Red Sea. Since then ,
the involvement of private Saudi investors in oil projects in Yemen
is seen a portent of what may eventually happen in Somalia. It is an
obvious investment opportunity right in Saudi Arabia's backyard. The
head offices of those oil companies holding concessions in Somalia
have already been visited by numerous intermediaries and commission
agents claiming to be acting for major Middle East financial
The companies see this as an ominous sign that future investors
in Somalia may repeat the mistakes made in Yemen. Yemeni oil
exploloration is stalling because companies paid huge fees to
intermediaries, followed by even larger signature bonuses to the
government, in order to acquire concessions. The average size of oil
finds in Yemen and local operating costs mean that such fees can
never be recovered from profits. The Saudi-owned Nimir Petroleum
Company , which won the bidding to take over oil production in the
Shabwa field discovered by Soviet explorers, is the most prominent
example. If the commission agents become too greedy in their quests
find oil investment for Somalia - whenever this becomes possible -
they could stifle an oil industry there before it is born.