SomaliPress.com

Canadian company aims oil exploration in Somalia soon

Published on Sunday 25th May 2008

Somalia: A Canadian company will soon begin exploring for oil in northeastern Somalia, a regional minister said Sunday, despite Somalia having neither a stable government nor a law governing such projects.

A ship belonging to Africa Oil Corp. and carrying oil exploration equipment has docked at the port of Bossaso, and the Canadian company will begin exploration soon, said Hassan Osman Alore, the region's energy and minerals minister.

He said the Vancouver, Canada-based Africa Oil Corp. will spend nine months looking for oil in the Dharor and Nugal valleys in the semiautonomous northeastern region of Puntland. On its web site Africa Oil Corp. says it has an 80 percent participating interest in the licenses and operation of the Dharor Valley and Nugal Valley projects. The Canadian company says it will pay US$50 million (€31.8 million) over 6 years for its 80 percent interest.

"We believe that Puntland has good oil deposits similar to the Arabian Gulf countries," Alore told The Associated Press.

Where the oil exploration is taking place is, "not a disputed area. It is a safe place," Alore said.

Violence has left much of Somalia without a stable government for 17 years. Puntland, however, has been relatively stable during that time.

Legislation to govern oil exploration and exploitation, set up a state-owned company — the Somali Petroleum Corp. — was presented to Somalia's transitional Parliament last year for debate but it has yet to be passed.

Puntland and the transitional federal government have disagreed in the past over which government has the right to enter into oil exploration and exploitation deals and the legislation is aimed at helping resolving that.

President Abdullahi Yusuf, "has sent an endorsement letter to Puntland and he has authorized the oil exploration and production deal. We cannot wait for parliament to pass the oil and energy law," Alore said. "Many Puntlanders will be employed", AP report said.

On its web site, Africa Oil Corp. says it entered an exploration agreement with the Puntland government in January 2007, something Alore confirmed. Africa Oil Corp. is listed on the Toronto Venture Exchange.

Alore said that the Houston, U.S.-based Conoco-Phillips did exploration work in Nugal Valley in the 1980s at a cost of US$150 million.

He said regional government officials had contacted the company about resuming its exploration, but the company did not show interest so officials reached out to other firms.

Somalia has been in a state of anarchy since warlords overthrew long-serving dictator Mohamed Siad Barre in 1991. Yusuf leads a transitional federal government formed in 2004, but his administration is unable to assert much authority.