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Issue 510/ 5th - 11th Nov 2011
Somaliland Says Open For Oil Business, Pirates Beware
By Ed Stoddard
Cape Town, SA, November 5, 2011 – The break-away territory of Somaliland is open for hydrocarbon business and has a message for investors worried by its rough neighborhood: this is not Somalia and pirates here go to jail.
Hussein Abdi Dualeh, the minister of energy and mining, said it was unfair to lump Somaliland with lawless Somalia, where pirates have captured oil tankers and headlines.
"We have no navy to speak of but what deters pirates is the prison sentences they get, 25 years or more. We have been successful in catching them with limited resources," Dualeh told Reuters on the sidelines of an African oil conference.
"We have over 100 pirates in our prisons," he added.
Dualeh earlier told the conference that Somaliland, which declared independence from Somalia in 1991 but has not been formally recognized internationally, had seen almost no exploration but had huge potential with a geology similar to basins containing 9 billion barrels across the Gulf of Aden.
He said three firms -- London listed company Ophir Energy, Asante Oil and Prime Resources -- had just signed deals with his government under which they will have 18 months to explore, conduct seismic tests and identify wells.
Ophir has a track record in the region with gas discoveries off the coast of Tanzania.
Only 21 wells have been drilled in Somaliland, making it under explored even by the frontier standards of the region, where the oil and gas industries are in their infancy.
The minister said a number of big oil companies with permits to operate there left what is now Somaliland in the late 1980s and declared force majeure during Somalia's escalating civil conflict.
"We are talking about the big boys like Chevron, Conoco. We asked them to come back for years but they would not. Now it's a clean slate," he said, adding they must reapply for permits or concessions.
"It's been over 20 years so they no longer have a legal interest in Somaliland," he said.
Offshore East Africa has yet to produce a commercially viable oil source but gas discoveries off Mozambique and Tanzania have prompted great interest.
Oil discoveries would be a cash boon to Somaliland though hydrocarbons have often proven to be a curse to African nations as the opaque nature of the industry can breed corruption.
Dualeh said he had recently been to Norway and preferred its oil revenue model to Nigeria's, where tens of billions of petro-dollars have been stolen or squandered over the decades and oil dependency has undermined other sectors of the economy.
"Norway is a model we can at least aspire to ... they have managed to protect their other sectors without letting oil crowd them out," he said.