Issue 202

The open letter to you written by Mustafa Yusuf All and Ahmed All, dated July 29, 2005 is an ill-informed, immature and unsubstantiated piece of “junk mail”, a response to which is fundamentally lowering oneself to their level of ignorance, jealousy and frustrated pseudo-intelligentsia. Yet, left unanswered, it gives rise to more speculations among the masses, who might read this “junk”in isolation. Hence, this response.

However, prior to responding to this open letter by Mustafa Y. Ali and Ahmed Ali (hereinafter referred as 2-Alis), we voice our serious concern regarding the following:

a. How did the 2-Alis get a copy of the Production Sharing Agreement (PSA) signed between REC and MW&MR/GOS on April 27, 2003 ??

b. Who made available the information to the 2-Alis regarding the details of when REC was allowed to commence the Second Exploration Phase?? The July 2005 authority for the said second phase work commencement was a letter from MW&MR to REC. Such correspondence is always confidential

c. The 2-Alis clearly make the statement in their letter “ ….after examining the agreement and a report prepared by REC …” A natural conclusion would be that MW&MR did provide the relevant documents to the 2-Alis!!

It is obvious, from the foregoing, that either there is a breach of security of data/information/correspondence within the MW&MR or MW&MR is knowingly providing confidential information to others. Either way, this is totally unacceptable and hence, due measures must be taken forthwith by the Line Ministry.

In addition, previously, we have pointed out to MW&MR that information acquired and purchased by REC and processed and duly reported by REC engaged consultants, have been illegally copied and submitted to MW&MR and that the latter need to provide complete data protection to investors such as REC. Alas, it appears that this has not been addressed to date.

In so far as REC company structure is concerned, we have made it abundantly clear from the outset that we are 75% owned by the Mvelaphanda Resources (Mvela) of South Africa and to this effect the Chairman of Mvela and his colleagues visited Somaliland in June 2003 to discuss this matter with MW&MR and other authorities in the GOS, including yourself. REC was set up as a “Special Purpose Vehicle” [SPV] for the Somaliland Oil and Gas project in the UK on a minimal basis, subject to our work commencement with due approvals from the Council of Ministers (COM) and detailed work program agreement between REC and MW&MR, enabling full project implementation - a stage we are still striving to achieve, due to the far too-frequent contradictory directives from the MW&MR!! The SPV set-up need was also justified due to the lack of international recognition of Somaliland as a Sovereign State . REC advised MW&MR and MW&MR so agreed; that in the interim all matters technical, financial and corporate shall be dealt through Mvela. In addition, due to the involvement of certain Dignitaries with REC (as you are well-aware of) it was agreed that REC corporate structure would not publicly reflect the Board or the Shareholders until such time we are able to commence work following requisite approvals. Accordingly, REC was kept as a ‘dormant’ entity, as can be readily seen from the Companies House document.

For your information, Mvela has now created an oil and gas arm known as Ophir Energy Company Limited (Ophir), which in turn owns 75% of REC and Mvela directly owns 54% of Ophir. Other investors in Ophir are major Financial Institutions and major corporations. The remaining 25% held by Dr. Andy Chakrabarti, the author of this note, who started REC and has made considerable investment in this Somaliland Oil and Gas venture, as you know.

It should be pointed out that MW&MR’s communication of November 17, 2004 to REC regarding the COM decision continued to be debated till March 2005 and In fact, some of the issues pertinent to this remain, as yet, unresolved. Only in the spirit of mutual cooperation REC continued to work on the Blocks awarded to REC.

MW&MR has legal document showing its ownership structure and the 75% ownership of REC by Ophir, in turn, a subsidiary of Mvela. MW&MR and GOS are well-aware that Mvela is a multi-billion Dollar company being significant/controlling shareholders of major World class corporations, including but not limited to Goldfields SA (4th largest gold producer in the World), Northam Platinum (4th largest Platinum producer in South Africa), Trans Hex (3rd largest Diamond Producer in SA), and Mvelaphanda Energy with assets in Nigeria, Gabon, Angola, Equatorial Guinea, Libya and many other countries [now dealing as and through Ophir]. Mvela is also involved in Healthcare, Transport, Construction, Fisheries and a multitude of other business activities. Relationship among Mvela, Ophir and REC vis-à-vis Somaliland Oil and Gas program can be easily verified via Mvela office as is well-known to the GOS. Ophir is the technical lead and partner of REC (through Mvela}, and several well-qualified and globally experienced petroleum professionals work for the Rova/ Ophir/ Mvela consortium.

The 2-Alis may not know that REC paid US$500,000 Signature Bonus to MW&MR/GOS. This is an investment made by REC even before receiving due approval on their concessions from the COM!! We wonder how a so called ‘Bogus Company”, and ‘not a genuine company’, with a mere one hundred pounds sterling capital paid an amount of US$500,000 in one shot!!!!

REC therefore, herewith summarily dismisses unfounded and malicious allegations of the 2-Alis against REC’s corporate structure and technical-financial abilities. The adjectives used by them do give rise to cause for libel and REC intends to seek, henceforth, legal recourse against these two culprits, with your agreement.

While REC has no reason to comment on the 2-Alis observations on PSA and their grievances for the GOS signing the PSA with REC, the following points are of note:

The PSA was modeled after a similar World Bank document and was developed further with proper legal bearings by an international Petroleum law firm. The GOS did take into account the petroleum law as was in vogue in Somalia at the time of oil exploration in the ‘80s
The late President, H. E. Ibrahim Egal, made massive efforts, through the most competent law firms in Washington D.C. and Paris, to bring back companies like BP-AMOCO, CHEVRON and CONOCO. After years of trying he finally gave up as these companies continued to maintain ‘Force Majeure’ as per agreement signed in Somalia . Furthermore, these companies continued to refuse the Sovereignty of Somaliland. Only at that juncture in late 1999, REC was invited by the (105 to look into the oil and gas exploration investment opportunities in Somaliland by MW&MR/ (105.
Work Program of each phase is agreed upon in details with MW&MR. Such details are not an integral part of the PSA, but are addressed, on as needed basis, as recently executed between MW&MR and Rova on September 26, 2005 for the “Expanded Second Phase”

d. Acreage Fee was not included in the PSA at that stage as an incentive to bring investment. However, it was agreed that once work commences, such fees would be payable, after the MW&MR determines what is a sensible rate, to be defined via the Mining {Petroleum?} Code. For a high-risk area like Somaliland where viable commercial oil discovery is yet to be made, an acreage fee of US$1,000 per sq. km. is a suggestion made in sheer ignorance and utter stupidity!! MW&MR and Ron have mutually elaborated on this issue for sometime now and MW&MR has proposed, a few days ago, a sum of US$5/Sq.Km., as the annual ground rental/acreage fee. The matter is still being reviewed by REC. It is obvious that even the MW&MR prescribed fee is by far more realistic than the ill informed and ignorant 2-Alis!!

e. In so far as REC’s not fulfilling the contractual obligations are concerned, at the outset, REC maintains that it is none of the 2-Alis business. If there is a complaint it should be MW&MR/GOS who should make that known, not some half-baked, opportunists trying to squeeze money out of Somaliland .

REC has submitted 4 documents to the MW&MR, covering the work done in the Initial Exploration Phase (IEP). These data were collected by reputed international organizations. Such data are strictly confidential and for the internal record of MW&MR/GOS -not for the consultants desperate to take money from the Somaliland Treasury to boost their academic income! The work that the 2-Alis refer to is a compilation report to provide overall work scope only. Full reports were not released specifically because REC was aware of the data piracy practiced by people like the 2-Alis, who are real criminals and should be treated as such. The work submitted by REC to MW&MR in conclusion of the IEP was based on available data. There was no “Existing Data”. MW&MR did not have any information and REC certainly never received even a single piece of paper from MW&MR that could constitute as the existing data. The information REC acquired was from a consulting organization in the USA , who acted as the repository of all “ Somalia ” oil exploration data in the ‘80s and they were obligated not to give the data in their possession due to a payment dispute with the World Bank. Suffice it to say, that REC produced enough studies done by 4 different organizations based on what data could be accessed and that is the most one can do. REC, unlike the 2-Alis is not in the business of data piracy or industrial espionage! On the other hand, REC is well aware that the 2-Alis took proprietary information, acquired and paid for by REC and its associates, at least in two separate instances, and tried to pass them on as their data, in an effort to gain money.

This is well-evidenced in the fact that the 2-Alis are currently trying to sell CHEVRON’S proprietary data to a ‘fly-by-night’ Indian Company for a sum of USS 97,000 and even misleading the latter by passing on STANVAC drilled three Dagah Shebel wells information as CHEVRON data!!

The data provided by REC to MW&MR indeed point out the drill locations and related logistics, albeit their further refining is warranted in REC’s opinion. Again, the MW&MR is well-aware of this, but REC is reluctant to make such matters a public knowledge via an open file report, in enabling people like the 2-Alis to steal such information ‘comfortably’ and use it for their own gain!!

The false accusation of REC never visiting the contract area reflects how ignorant the 2-Alis are of the truth. Even the previous Deputy Minister of MW&MR visited the area with REC and their Chinese consultants. The latter has been in the area some 6 times with REC, let alone REC staff visits and those of other consultants and drilling experts in the company of REC!

REC has no reason to explain their technical abilities to the 2-Alis; suffice it to say, that REC’s project operator Ophir are renowned operators in this industry and consist of the entire operating team of the Fusion Oil plc of the UK , [now part of Sterling Energy plc] credited with many oil discoveries in Africa !

REC reiterates that it has ‘reprocessed and reinterpreted’ available data — with the proviso that any definition of existing data shall be equivalent to zero, due to their inaccessibility. Unlike the 2-Alis, REC does not steal other people’s data but acquires them legitimately, as proven to MW&MR/GOS. REC’s US Consultants have given in writing that “.... all available data in their possession till 2001 were reinterpreted and reprocessed, and were subsequently and duly documented in a REC report.....“. The said Consultants were the World Bank chosen repositories for all Somalia oil and gas information!

The work submitted by REC to MW&MR for the IEP is worth well in excess of US$500,000 and MW&MR should be well aware of that. REC has no reason to divulge such details to anyone except MW&MR, let alone to such pirates, like the 2-Alis.

REC’s submissions of relevant information to the MW&MR have enabled the latter to allow REC to enter the Second Exploration Phase (SEP). That in itself is a proof of the fact the 2-Alis claims are unsubstantiated, full of malicious gossips and a sheer reflection of their inability to come into this venture gaining consulting fees.

REC, therefore, dismisses, off-hand the ridiculous recommendations of the 2-Alis made to you and submits that such dangerous individuals, whose only aim is to get money in any shape or form either from the GOS/MW&MR or private investors, should be blacklisted permanently for the greater benefit of Somaliland .

Honest consultants and qualified professionals are welcome to deal with REC anytime. As we enter the SEP, we shall be engaging Somalilanders at varied professional and other levels. REC will never give in to the blackmailing efforts to the likes of the 2-Alis, the shame and disgrace of Somaliland and to the professional bodies of the World.

We reiterate that REC shall now place this matter with their legal counsel and take all steps against these individuals, to protect its interests. We would like MW&MR to be cognizant of this matter and shall keep your Government and Somalilanders posted accordingly.