canmex takeover of rrs, page-22

Something like this:

MONTHLYNEWS&ANALYSISOFOIL,GAS,POWER,POLICY&FINANCE
ISSN 1463-1849

Join the clan: fractured Somalia
draws in investors

All the temptations of African energy business are on show in Somalia, where
deals are being cut by a diverse range of IOCs, but the risks remain extreme.
TFG President Abdullahi is marginalised from other power-brokers while his
Ethiopian allies continue their occupation, and the legal status of Somalia’s
breakaway states remains ambiguous, writes Nadine Marroushi.

Somalia made headlines when

Transitional Federal Government

(TFG) President Abdullahi Yusuf
Ahmed signed a licensing agreement
with China National Offshore Oil
Company (CNOOC), giving the
Chinese firm exploration rights in the
north Mudug region, some 500km
north-east of the capital Mogadishu.

Chastened by recent attacks on
workers in Ethiopia and Niger, China
Inc’s willingness to risk entering a
fractured state, whose central
government may even lack the authority
to sign deals, once again underlined the
People’s Republic’s hunger to feed its
energy demand (AE 114/1).

It also highlighted foreign investors’
confidence in the resource potential of
Somalia and its breakaway states – the
Republic of Puntland, which describes
itself as ‘autonomous’, and Republic of
Somaliland, which wants full
independence (AE 100/6). They are
attracted by a geological province
analogous to Yemen and Arabian trends.

Chinese and Indian firms, the Ras
Al-Khaimah (RAK) government’s
commercial arm, Australian Stock
Exchange-listed Range Resources, Ophir
Energy Company (chaired by South
African ‘comrade in business’ Tokyo
Sexwale and controlled by his
Mvelaphanda Holdings under Perth,
Australia-based Alan Stein’s direction)
and unknown minnow Prime Resources
all now have blocks in the Greater

Somali area’s competing jurisdictions (see
map below).

Range has based its Puntland play on
exploration conducted in the 1980s by
several oil majors. That acreage, granted
by late dictator Mohamed Siad Barre’s
then Republic of Somalia administration,
encompassed highly prospective basins,
where US major ConocoPhilips and
Italy’s Agip identified several prospects
and drilled three wells, which had oil
shows, before the government fell in
1991. Conoco also identified areas for
further drilling.

The 1990s civil war led to companies,
also including Amoco (now part of BP)
and Chevron, declaring force majeure and
pulling out – and the major challenge to
working in Greater Somalia remains its
complex politics (see box article, below).

Worth the paper?

Reports surrounding the
CNOOC/TFG production-sharing
agreement pointed to the pitfalls,asTFG
Prime Minister Ali Mohamed Gedi told
the Financial Times he was “unaware” of
the deal brokered by his president (the
two are said not to get on).

CNOOC and the smaller China
International Oil and Gas are expected
to start survey work in Puntland’s
Mudug region later this year.

Opponents including former TFG
deputy prime minister Hussain
Mohammed Aideed argue the deal is
illegal, because the government is only
transitional and has no authority to sign

agreements with foreign companies. The interest foreign players. Most recently,
PSA must be passed by parliament and the RAK government acquired one
agreed by the United Nations,Aideed said block situated in between Range
at the Royal Institute of International Resource’s Dharoor and Nogal blocks.
Affairs (Chatham House) in London on

24 July. Common roots

Aideed believed “the deal won’t go According to a source close to the deal,
through, because the Mudug region is a “the government of RAK was invited by
Hawiye area and the tribes will reject it.” Puntland to invest, due to the close

He added: “all this is caused, because historical ties.” Boosaaso on the Gulf of
there is no money for theTFG.” He told Aden, formerly known as Bender
African Energy that “deals signed in Qassim, was at one point under the
Puntland and Somaliland are also illegal.” protection of RAK’s Al-Qawism clan.

Puntland remains overshadowed by The story goes that it was first settled in
Somalia’s politics, but continues to the 14th century by an Arab trader,

AfteraturbulentperiodwhentheIslamicCourtsUnion(ICU)ruledinMogadishubutwaslinkedtoAl-QaedabytheUnitedStates,theUnitedNations-backedTransitionalFederalGovernment(TFG),ledbyPresidentAbdullahiYusufAhmed,isbackontop,butatthecostofSomaliabeingoccupiedbytheEthiopianarmy.
TheTFGiswidelydistrusted,andisrivenbytheclanandfactionalsplitsthattypifySomalipolitics.
AtthelateJuneAfricaHardballmeeting,
convenedbyCross-borderInformationinHamburg,theAmerican/EthiopianengagementinSomaliawasdescribedasan“almostunmitigateddisaster”.Itwasseenasthereflectionofa“newColdWar–aglobalideologicalconflictthathasbeenfashionedoutofahistoricdisputebetweentwocountries,
EthiopiaandSomalia.”Hardball’sleadregionalanalystobservedthat“thebestsolutionsofarwasbytheformerUNenvoyMohammedSahnoun:totreatthedisputebydealingwithclanleaders.”
SpeakingattheRoyalInstituteofInternationalAffairs(ChathamHouse)inLondonon24July,formerTFGdeputyprimeministerHussainMohammedAideedarguedthat“thecatalystforthebreakdownoftheTFGwasAbdullahi’sunilateralrequestfor20,000peacekeepingtroops,”whichhearguedwasnotproperlydiscussed:“Thisquestionedhiswillingnesstoco-operatewithpeersinmattersregardinggovernment,andshookthestabilityofthenewlybornTFG.”AccordingtoAideed,
factionalleaderswonderedwhytheirmilitiasweren’tmerged,sotheTFGcouldevaluatewhetheraforeignpeace-keepingforcewasneeded.AbdullahiandPrimeMinisterAliMohamedGediwereworkingindependentlyandwithEthiopia,whichAideedclaimed“alwayshadanagendainSomalia”.
AideedsaidheresignedfromtheTFGwhenitdeviatedfromitsoriginalpathto“ensurethebalanceofpoweramongallfactionsofSomalia.”HeisasonofthelateGeneralMohamedFarahAideed,whoseHawiyeclanoverthrewtheSiadBarreregimein1991;afteraperiodtryingtoruleoveracivilwar,hewaskilledbymembersofhisownsub-clan.
Underheavyinternationalpressure,anationalreconciliationconferencehasbeentryingtogetofftheground,butawidespreadboycottmeansthetalkshaveyettogainsufficientlegitimacy,

Somalia Analysis


Somalia’scompetingjurisdictions
Qassim, who is believed to be ofYemeni-Mehri origin and had
a camel called Boosaas. The Al-Qassimis established their
emirate in the 18th century.

RAK is also negotiating with Canmex Holdings, which has
an 80% farm-out agreement with Range Resources, for the
Nogal and Dharoor blocks. It plans to acquire a 30% stake in
these blocks. As operator, under its deal with Range, Canmex
is allowed to farm out part of its interest.

Asked if RAK was concerned that agreements signed by any
of the three governments might be illegal, a source replied:“We
have the approval from the TFG and Puntland governments, so
we’re covered.”

Through the new Puntland Hydrocarbon Development
Company joint venture RAK will undertake E&P work. Several
agreements were signed recently by Puntland President
Mohammed Musse Hersi and RAK Crown Prince Sheikh
Saud Bin Saqr Al-Qasimi. These included a commitment to
co-operate in establishing a national oil company.

RAK is working with consultants on plans to develop
infrastructure with a view to building a port and airport in
Boosaaso (AE118/14). It also has plans for minerals exploration.

Aussie investors still bullish

Range also remains confident in Puntland. “We continue to
have a good relationship with the Puntland government, and
welcome the interest of foreign players,” managing director
Michael Povey told African Energy. CNOOC’s concession did
not overlap Range’s blocks, he said – excluding less than 1% of
the area on the coast.

Range relinquished its 100% exploration rights to the
Puntland government in July 2006,while maintaining areas with
the highest prospects, including all mineral areas of interest and
all offshore rights. “For this reason we are not concerned about
CNOOC’s or RAK’s entries,” Povey said.

Povey said he was “fed up” of the negative headlines Somalia
receives, and the influence this has on the international
community in their perceptions of neighbouring areas, such as
Puntland. The attraction of foreign players to Puntland was its
mirroring of the Yemen Marib Shabwa and Sirr-Sayun basins,
which have an estimated resource of 19.25bn boe and proven
reserves of 9bn bbls.

The Perth-based company’s latest development has been to
complete all joint venture negotiations and regulatory approvals
for a farm-out agreement with Canmex, which will earn an
80% interest in the Nogul and Dharoor basins in return for
spending $45m on exploration. Canmex – 30%-owned by the
TSX-listed Canmex Minerals Corporation – will also pay a $5m
signature bonus to Range, plus $3.5m once commercial
production has begun. The PSA’s six-year work programme
agreed with the government of Puntland, includes drilling at
least two wells in each of the basins.

Range also recently raised $20m through a private placement
to complete payment for its mineral rights. It is still planning a
listing on London’s Alternative Investment Market, by end-2007.

African enregy.com