19 May 2007 04:26


  • Title: [SW Country] (AAPG/The Times/Petroleum Economist) OIL IN SOMALIA?
  • Posted by/on:[AMJ][Friday, Sept. 22, 2000]

Based on published and unpublished data, the geology of these basins proves that oil and gas have been generated with favorable reservoirs, as well as structural and stratigraphic traps.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...."Abstract from the AAPG Eastern Section 2000 Meeting"


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Based on published and unpublished data, the geology of these basins proves that oil and gas have been generated with favorable reservoirs, as well as structural and stratigraphic traps.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.





 Copyright 1993 The Times Mirror Company
Los Angeles Times

January 18, 1993







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 military effort.

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. intervention.

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 failed."

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 reserves.

"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 much?

"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 coast.

"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 ones.

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 northern Somalia.

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 region.

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 Survey.

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 stake.

"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. (UK) 1991.
Petroleum Economist. Vol 58, Issue n10, Oct, 1991, p19(2).

Oil Hopes Hinge on North Somalia

Maria Kielmas

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.

International Study

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.

Somali Movements

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 Gadabursi clans.

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.

Ethiopian contracts

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 and Somalia.

Coming back

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 1993, pp.20-21.

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.

Conspiracy theories

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 Ethiopian border.

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 interests.

Too Greedy

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.


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