Wednesday, March 7, 2012

Somalia's Latest Problem: The Resource Curse

It is looking like Somalia may have another problem to soon deal with: the resource curse.

The first oil from a new well drilled in northern Somalia could flow to the surface just weeks from now.  As is typically the case when a new national resource is discovered in an under-developed nation, the new oil patch is being described as the cure for Somalia's ills – a domestic source of income that will promote stability and development for the nation that will bring the Somalia diaspora home.  The reality is much more problematic.

While Somalia's Transitional Federal Government (TFG) has signed deals for oil exploration, the oil field is actually located in the northern part of the country in Puntland, a semi-autonomous region of Somalia that has little to do with the TFG.  To further complicate matters, the TFG's mandate runs out in August (it is suppose to be a “transitional” government after all), so what will happen to their authority to enter into contracts such as this is a question.  And the presence of foreigners looking for wealth in their land has drawn the attention of Somalia's Islamist militants.  A little-known Islamist militia, which according to The Guardian is led by the ridiculously named Shiekh Atom, has pledged loyalty to Somalia's top terror group, al-Shabaab and has declared all oil contracts signed in Puntland to be null and void.

Some Somalis are also skeptical about the potential for oil to save their country.  It is a promise that seldom works out as well as promised, especially in Africa.  One only has to look at oil-producing countries like Equatorial Guinea and Nigeria, where the quality of life for the population in the oil-producing regions has actually gotten worse since the discovery of oil, for evidence of this trend.  A number of Somalis cited in articles about Puntland's oil are skeptical of the alleged windfall coming to their nation and worry that most of the wealth will wind up in the hands of foreign companies.

There also seems to be a little confusion over what's actually being drilled in Puntland in the first place.  When a potential new oil or gas reserve is discovered, it is practice to first drill a test well to analyze the quality and commercial viability of the field.  Yet in a conference on Somalia last week, British Prime Minister David Cameron said that not only was the first oil expected to flow from the Puntland well in the coming weeks, but that pipelines had also already been laid to the coast so that the oil could be exported – construction of a pipeline typically doesn't occur until you know you have a viable field on your hands, otherwise it is a lost investment.

The oil news out of Puntland also puts this story from December 2010 in greater context.  The government of Puntland had announced the signing of a deal with a shadowy private security firm; the deal was allegedly to fight pirates along the Somali coast, yet security efforts were focused inland.  The suggestion at the time was that firm's real purpose was to protect foreign workers who were prospecting for natural gas reserves in Puntland's interior.  
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