By Andrew Cawthorne

NAIROBI, August 8, 2007 – Somalia's parliament is to debate a new national hydrocarbon law this week, a government envoy said on Wednesday, amid controversy and questions over the status of past and future contracts with foreign explorers.

"The hydrocarbon law is going to be debated today or tomorrow in the parliament in Baidoa," Somalia's ambassador to Kenya, Mohamed Ali Nur, told a news conference.

"And I believe after the debate, it will pass."

Details of the new legislation have not yet been made public, but industry and Somali sources believe it will include the creation of a state oil company and aim to clarify the legal status of deals with foreign explorers.

Somalia remains a speculative bet for exploration with no proven oil reserves, according to the U.S. Energy Information Administration, and only 200 billion cubic feet of proven natural gas reserves.

However, in the 1980s Western oil majors including ConocoPhilips, Chevron and Total held exploration concessions there. They left when the nation descended into chaos in 1991.

A World Bank and U.N. survey that year of eight northeast African countries' petroleum potential ranked Somalia second only to Sudan as the top prospective commercial producer due to lying in a regional oil window across the Gulf of Aden.

NEWS SOMALI STATE COMPANY

A new U.N.-backed administration, the Transitional Federal Government, is seeking to restore central rule to Somalia, but faces an insurgency in the capital Mogadishu and has little real authority yet over the rest of the country.

Experts say the interim government's "national" oil law may face resistance from breakaway enclave Somaliland and semi-autonomous Puntland which have both signed separate deals -- with South Africa's Ophir and Australia's Range Resources respectively.

TFG documents seen by Reuters this week show Somalia is considering creating a state firm -- the Somalia Petroleum Corporation -- to oversee the sector. It would give a 49 percent stake to Indonesia's PT Medco Energi Internasional Tbk and Kuwait Energy Company, the papers said.

Asked about the documents, envoy Nur said: "Yes, that's in the law. We are going to have our own Somali petroleum company."

But he declined comment on Indonesian and Kuwaiti participation. "I don't want to predict. We will wait until the law is passed," he said.

Oil has become a controversial subject in Somalia where experts say a power struggle has emerged between President Abdillahi Yusuf and Prime Minister Gedi over exploration rights.

Last month, the Financial Times said Yusuf had signed a production-sharing deal with China's largest offshore oil and gas producer CNOOC Ltd..

But Nur said no new agreement could be struck until the national hydrocarbon law was passed by parliament.

"Regarding the Chinese company signing an agreement with the president, I think the prime minister has talked about that. We have not seen officially any agreement that was signed by the president," he said.

"The government's decision was that until the law is passed, the government will not sign any agreement with any company."

Source: Reuters