Somalia’s inaugural offshore oil & gas deal with U.S. operator deemed illegal

Following several agreements for hydrocarbon exploration offshore Somalia, which were inked by a U.S.-based company and the Somali Ministry of Petroleum and Minerals, the office of the Auditor General has confirmed that it will be taking legal action against the parties involved in the signing of these agreements, deeming them null and void as they violate the country’s laws.

The U.S.-based Coastline Exploration announced on Saturday, 19 February 2022, that it had signed seven Production Sharing Agreements (PSAs) covering offshore, deepwater blocks of the Federal Republic of Somalia to proceed with plans to explore the oil and gas potential of the many prospects and leads identified in these offshore blocks. 

W. Richard Anderson, Chief Executive of Coastline, remarked at the time: “The Government of Somalia and the Ministry of Petroleum have spent a great deal of time and effort to ensure the country has the proper legal and administrative infrastructure to support oil and gas exploration with the passing of the Petroleum Law, adoption of the Revenue Sharing Agreement among the Federal Government and its Members States and the establishment of the Somali Petroleum Authority to provide continuing support for the anticipated growth in the sector.”

The company explained that the signing ceremony was witnessed, amongst others, by the Chairman & CEO and Vice-Chair of the Somali Petroleum Authority, who highlighted their desire for the expected economic and social benefits for the Somali people.

Jake UIrich, Coastline’s Chairman, explained: “After a rigorous negotiating process, we are delighted to have signed these inaugural PSAs with the Somali Government. This marks a defining moment for the country. The way is now open for other oil and gas companies to join us in our quest for commercial discoveries through the current licensing round and, also through direct negotiations with the Somali oil and gas authorities.”

On the same date, Abdirashid Ahmed, Somali Minister of Petroleum & Mineral Resources confirmed the signing of the deal with Coastline, calling it “a victory for the Somali people” and thanked “the President of FGS for supporting the process and encouraging us to complete this task.”

However, the first opposition came directly from the office of Prime Minister Mohamed Hussein Roble only a couple of hours after the signing of the deal was confirmed.

The Prime Minister’s office confirmed further action would be taken: “The Prime Minister will take legal action in response to this act that violates the National Assets and the legacy of future generations to safeguard the trust of the Somali Nation.”

Shortly afterwards, a statement from the office of President, Mohamed Abdullahi Farmajo, declared the deal null and void, stating: “The Presidency FGS hereby declares nullification of Petroleum pact signed by the Minister on behalf of FGS. The deal contravenes Presidential Decree 7/8/2021 which bans the inking of deals during elections so as to protect public resources from exploitation during the elections.”

In the latest update issued on Sunday, 20 February 2022, the office of the Auditor General informed a complaint was filed with the Office of the Attorney General regarding the deal between the Ministry of Petroleum and Coastline Exploration and recommended to the Prime Minister to suspend all individuals involved in the signing until the judiciary fulfils its responsibilities.

After reviewing the relevant process and procedures pertaining to the deal, the office of the Auditor General has dubbed it as “an unlawful agreement”, explaining that the signed agreements violate the constitutional amendment and pose a threat to Somali resources and the preservation of future generations’ assets.

In addition, the office of the Auditor General requested that the Ministry of Foreign Affairs and other relevant agencies carry out an investigation in accordance with the country’s laws, the US Foreign Corrupt Practices Act (FCPA) and other international laws to determine whether the signing of the deal was affected by any fraudulent activities.