- An Australian company today announced the "historic" start-up of a large seismic survey in the semi-independent Somali region of Puntland. While investors are positive on the prospects for oil exploration, operations in the disputed status of Puntland could carry a great political risk. New revenues could fuel the Somali war.
Range Resources Limited, a small Australian company, through its joint venture partner Africa Oil Corporation has started a 2,600 kilometre seismic survey in the Puntland area of Somalia, located at the tip of the African Horn. "We have been able to make a start on the survey, which is an integral part of a comprehensive exploration programme in the region, following the arrival of seismic equipment at Bossaso Port," Managing Director Michael Povey said today.
Africa Oil is the operator of the onshore oil and gas exploration effort with an obligation to spend US$ 50 million to earn an 80 percent interest in the two main basin areas in the Nogal and Darin Basins of Puntland. The project area covers 200,000 square kilometres with Range Resources having exclusive exploration rights to all key hydrocarbon and mineral regions in Puntland, according to the company.
The exploration deal has already caused controversy in Somalia, as the original deal with foreign explorers was made by the regional administration of Puntland. Immediately, the deal was protested by the transitional government of Somalia, with transitional Prime Minister Ali Mohamed Gedi sending a sharp protest letter to the Australian stock exchange.
Further protests came from neighbouring Somaliland, a former British colony united with Italian Somalia in 1960, but re-declaring independence in 1991. The non-recognised state, located west of Puntland, claims parts of its territory is occupied by Puntland troops, and that these "occupied lands" where included in the exploration deal with Range Resources.
The business agreement in 2005 also caused surprise in Australia, where media referred to it as a "mysterious deal" between a very small company and territorial authorities that may have no jurisdiction to issue exclusive mining and exploration rights. The Australian government and the national stock exchange launched an investigation into the deal.
Despite initial scepticism in Mogadishu, the transitional government however changed its mind and nodded the deal through. Prime Minister Gedi made new statements, fully endorsing the deal. The change of mind probably came as a result of pressure from Somalia's transitional President Abdullahi Yusuf Ahmed, who earlier was the leader of Puntland. President Yusuf still has Puntland as his personal power basis, relying on revenues from the relatively calm region.
Puntland has declared its independence from Somalia and is governed by a regional authority based in Bossaso. Along with its independence declaration, the state also said it would return to a united Somalia as soon as peace, order and a central government was reinstalled. The possible discovery of oil in Puntland may however complicate such a reunification.
Also in Somaliland, the government is nervous about the consequences of the started explorations. It remains unsure whether the seismic survey will be concluded on lands claimed by Somaliland.
Finally, concerns are that new economic muzzles for Puntland - in the case of a major oil discovery - may again fuel the Somali war. According to several UN reports, the arms embargo against Somalia is constantly broken. Oil revenues would surely go to financing arms, which would tip the power balance in favour of Puntland troops. This is a major concern of both Somaliland authorities and warlords and civilians of southern Somalia.
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