Somalia’s untapped Oil and new petroleum bill creating further divisions

Reading Time: 3 minutesThe President of Somalia, Mohamed Abdullahi Farmajo on Saturday signed into law the controversial petroleum bill, paving the way to extraction and exportation of the end products.

For months now, the law had caused divisions with Somalia, with regional states protesting certain clauses which they deem controversial.

Jubaland and Puntland have strongly opposed certain provisions where they termed “draconian” and “unreasonable” after a tussle in both houses.

Last Friday, Puntland president Said Abdullahi Deni has called all state representatives in the Federal Government of Somalia for an urgent consultative meeting in Garowe next month, accusing FGS leaders of violating the country’s Federal system and the provisional constitution.

Last year, both the Lower House and the Senate endorsed the bill, although section legislators walked out in protest during debates.

The Federal States say they have not been consulted on the new contentious petroleum law, adding that no deal has yet been reached on the share of the natural resources in Somalia.

Farmajo hails stakeholders

But Farmajo, who has been at the helm for three years, assented the bill into law, ending the controversy surrounding the sharing of resources with member states.

The Somalia president hailed the two speakers of federal parliament, lawmakers and experts for their contributions, local media reported.

Petroleum law, Farmajo argued, will be a regulatory framework that will enhance investment and exploration within and outside Somalia.

The legislation allows the creation of institutions to oversee revenue sharing between the federal government and member states.

It will be the first time in three decades that Somalia will be extracting and exporting oil, a business which at one time was the backbone of the country’s economy.

Why the law is important for Somalia

Mohamed Ahmed, the Petroleum and Natural Resources Minister, had backed the law, arguing that it will help create more jobs for youths.

The law, he added, will help the country improve infrastructural development besides generating foreign income to the fractured economy of Somalia.

“We shall have many of our youths absorbed into the job industries. Our infrastructure will be fixed courtesy of the minerals,” he said during a trip to South Africa.

Somalia has beefed up security along the Indian Ocean shores to fight possible piracy that could hinder the extraction of oil, he added.

The Horn of Africa nation has embarked on its path to transform its petroleum industry and attract the attention of new investors.

Disputed maritime border not affected

But the extraction will not affect the Kenya-Somalia maritime border, which is now subject to International Court of Justice arbitration, Ahmed said.

The two countries are embroiled in the bitter boundary dispute, which had at some point triggered diplomatic fallout in 2019.

Ahmed said: “We respect the rule of law and we shall wait until the disputed areas are solved before exploring oil deposits.”

Kenya has been pushing for out of court settlement, which Somalia had outrightly rejected arguing that “we are comfortable with ICJ as an arbiter”.

Federal states uncomfortable

Despite the signing of the bill, a fallout between Mogadishu and federal states is looming, something which could derail extraction of the oil.

Said Deni, the Puntland President, recently dismissed the bill, arguing that “we were not consulted in compliance with the Constitution.”

The law will allow the central government to coordinate extraction and exportation of oil within the input of federal states, he added.

Mohamed Abdikadir, the deputy minister in charge of petroleum said: “The enactment of this law is a critical step forward for the Somali petroleum sector”.

Already, Somalia has signed a $1.7 million leases with Shell and ExxonMobil and Shell that will last for thirty years, SONNA reported.

The country is currently on an international roadshow to showcase the exploration opportunities available in its hydrocarbons sector.

 

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