As British oil firm is probed for corruption in Somalia, Mogadishu rejects proposed UN freeze on oil deals

Panoramic aerial view shot from over the Indian Ocean of the seaport of the southern Somali city of Kismayo. Somalia is trying to capitalise on its offshore reserves as it seeks to rebuild an economy. (Photo/ AU-UN IST/ Stuart Price.)

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SOMALIA opposes a moratorium on oil deals that’s being discussed at the United Nations as a way of stabilising one of the world’s most fragile states, Finance Minister Mohamed Adan said.

A new UN Monitoring Group report on Somalia, to be released in mid-October, will reiterate a recommendation first made in 2013 that the Security Council ban any oil deals in Somalia. The group argues that the country lacks a legal and regulatory framework to oversee the exploitation of energy resources.

But Somalia sees it as an infringement on its sovereignty. “It’s a sovereign issue,” Adan told reporters Friday in the Kenyan capital, Nairobi. “We will not welcome a blanket oil moratorium.”

Soma Oil & Gas Holdings Ltd., a London-based company that’s spent $40 million conducting surveys off the Horn of Africa nation’s coast, has also asked the British government to help block the proposal.

Soma is being investigated by the U.K.’s Serious Fraud Office over allegations of corruption in Somalia. The company denies any wrongdoing and said the UN monitoring group “fundamentally misunderstood” a capacity-building program in which salary payments totaling almost $500,000 were made to Somali oil officials.

But the Serious Fraud investigators say that money may have been corrupt payments to Somali government officials.

An April 2014 “side letter” from Soma to Somalia’s petroleum minister said the company would pay salaries and equipment costs to support the exploration programme up to a total of $400,000. The agreement was extended in April 2015, since when a further $90,000 has allegedly been paid.

$100,000 data room

A further $100,000 was paid for a “data room” to store and analyse seismic data but which has not been built.

Somalia hasn’t had a functioning central government for the past quarter century as it’s been wracked by civil war and an insurgency by the militant group Al-Shabaab.

The African Union has deployed about 22,000 peacekeepers to help government forces stabilize the country. Gains against the insurgents since August 2011 have enabled the government to begin exerting its authority over southern and central areas.

Soma has previously proposed a deal with the Somali government that may grant it as much as 90% of the country’s prospective oil revenue. The company has said that any deal with the government will include terms that are “fair and balanced.”

The World Bank is advising Somalia to put regulations in place to ensure oil resources benefit its citizens, Bella Bird, the Washington-based lender’s director for Somalia, said in an interview.

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