AN AUSTRALIAN mining company has paid millions of dollars in...

AN AUSTRALIAN mining company has paid millions of dollars in controversial fees to Somali rebels responsible for a surge in international piracy, including the hijacking this week of an oil supertanker.

Since 2005, oil explorer Range Resources has paid the disputed government of the Puntland State of Somalia more than $US6 million ($A9.3 million) for resource rights to the region.

Puntland's ruling clans are suspected of controlling piracy off the coast of Somalia — including the pirates who this week seized control of a Saudi-owned oil tanker, the Sirius Star, which is carrying a cargo of oil worth at least $US100 million.

The pirates last night confirmed to the television network al-Jazeera that they were demanding a ransom for the tanker, but did not specify an amount.

After signing a heads of agreement with Puntland's government in October 2005, Range Resources paid $US1.5 million up front, 17 monthly payments of $US200,000 and an additional one-off $US1 million. The payments ceased last year.

Range Resources has since made several "charitable donations" to Puntland's government, including a $US250,000 payment for an airport redevelopment last year. Range Resources directors Mike Povey and Peter Landau flew to Puntland to hand over that cheque.

In return, Range Resources holds the rights to all mineral and hydrocarbon exploration for Puntland, an area covering more than 212,000 square kilometres.

To date no oil has been recovered in Puntland by Range Resources or its mysterious joint-venture partner, Consort Private, which is registered in the Maldives.

In 2005, Somalia's Transitional Federal Government raised concerns with the Australian Stock Exchange over Range Resources' ability to secure the exclusive mineral and oil rights to a large slice of the country. In a letter to the ASX, then prime minister Ali Mohammed Gedi offered to co-operate with "any investigation" into the company's explorations claims.

His letter stated that the deal with the regional Puntland government was not valid because only his transitional government had the power to negotiate the sale of mineral and oil rights.

In the vague heads of agreement document released by Range Resources to the ASX and shareholders in October 2005, it is unclear who the actual beneficiary of the money for the oil and mining rights is.

Former Range Resources managing director Mike Povey, who quit the company last month, has since confirmed to The Age that the money was paid directly to Puntland's disputed government.

"Yes, it was paid to them," Mr Povey told The Age. "I do not know what the money was ultimately used for. I assume it was used for infrastructure projects, for running the country. It's a very poor part of the world and the money was much-needed."

Mr Povey denied that the money was effectively a kick-back to a corrupt regime, and one that is not recognised by rival provinces of Somalia. He also said he had no evidence that the money had been diverted to fund piracy or to buy weapons. "I know nothing about that at all," Mr Povey said.

Range's deal was struck with Puntland's minister of finance, Mohammed Ali Yusuf. His name appears on documents lodged by Range with the ASX.

Mr Yusuf's budget statement for Puntland for 2005-06 shows that money from Range Resources contributed to his department's budget, which was used to buy weapons for the "pacification of neighbouring non-Puntland territories".

In detailing his department's $US11.3 million of annual expenditure that year, Mr Yusuf stated: "Huge amounts of money had been spent on security … huge amounts had been spent on politics as well, especially on pacification of neighbouring non-Puntland territories like Southern Mudug and disputed territories of Sol and Sanag."

Online newspaper The Somaliland Times has also reported that funds from Range Resources have been used to buy weapons in the region. Range Resources disputes that report.

Piracy is the prime industry of Puntland, earning an estimated $US35 million this year in ransom payments.

Two Victorian policemen also have links with Range Resources and its operations in Puntland. In 2006, former Victoria Police sergeant Joe Obeid performed a security assessment for Range Resources in Puntland. That report declared that Puntland was safe for Range to pursue its business interests.

In 1998, Mr Obeid, who was stationed at Brunswick, was dismissed after being found guilty of five of seven disciplinary charges against him.

A police spokesman at the time said the charges included conduct likely to diminish public confidence in the force and conducting a business without the Chief Commissioner's permission.

Last year serving Victoria Police officer Tony Langdon performed a security assessment of Puntland for Range. Mr Langdon is the subject of an Ethical Standards Department investigation into allegations he threatened two private detectives. He denies the allegations.