Recent attack highlights ongoing threat to oil interests in Somaliland

15 Aug 2014

Recent attack highlights ongoing threat to oil int...

An attack on a convoy belonging to Norwegian/UAE oil company DNO in the Sool region highlights the high level threat to oil interests in the disputed territory between Somaliland and Puntland. DNO has denied Somali media reports that it has withdrawn its staff from Somaliland and suspended operations there. The latest attack raises further questions over the viability of onshore operations in the country, particularly in contested regions.

Garowe Media and several other Somali news outlets reported on 13 August that an unidentified clan militia ambushed a convoy carrying a DNO exploration team two days earlier near Hudur in Sool. The team, which included expatriate workers, was en route to DNO’s SL18 block when the convoy came under fire. It immediately returned to the Somaliland capital Hargeisa without sustaining any casualties.

DNO is one of several oil companies with interests in the Sool and Sanaag region, situated along the disputed border between the self-declared state of Somaliland and the semi-autonomous region of Puntland, which continues to consider itself part of Somalia. Somaliland, Puntland and the Somali Federal Government (SFG) in Mogadishu have all laid claim to overlapping oil blocks in the region and tensions are currently elevated over who has the authority to award oil concessions. Hargeisa awarded DNO the SL18 block in April 2013 despite protests from both Puntland and the SFG, and has also awarded concessions to Anglo-Turkish firm Genel Energy, which suspended operations in the country in September 2013 citing “a deteriorating security situation”.

The latest attack highlights the security challenges associated with operating in Somalia’s onshore oil sector, which is primarily located between Puntland and Somaliland. The security situation in the region has deteriorated since March after Puntland and the SFG began providing additional political and financial support to clan militias that reject Somaliland’s authority, notably the Khatumo group, which aims to establish its own autonomous state in the region. If militia allied to Puntland are found to have been involved in the DNO attack, this would be further evidence of the risk of foreign oil interests being directly targeted due to their association with rival authorities.

Irrespective of who was responsible, the incident will raise further questions over the long-term viability of exploration in the region. The Somaliland government has suggested an Oil Protection Unit (OPU) is formed to improve security and commissioned UK-based security company Assaye Risk to assess viability and establish plans in October 2013. The OPU would be made up of 580 recruits managed by Somaliland’s Interior Ministry in liaison with risk management companies hired by oil companies. The government hopes to have the OPU up and running by the end of the year, but a number of concerns surround the plan. Several observers, including the UN’s panel of experts on Somalia, have criticised the move, claiming the OPU would in effect be a private militia for the oil companies, with limited official oversight. Such a force could also increase companies’ exposure to attacks by armed groups opposed to Somaliland’s territorial claims. Complexities over accountability of the OPU, best practice and rules of engagement during any potential clashes involving the force could also have reputational and potential legal implications for associated companies.

The ongoing territorial disputes between federal and regional authorities mean oil interests in the Sool and Sanaag region will remain vulnerable to attack. Efforts to resolve the long-running dispute over who has the authority to award oil concessions are unlikely to make progress in the near term, due to a deadlock in the Somali parliament over the new constitution, which includes provisions for the allocation of natural resources. Hostilities between central and regional authorities mean a new constitution is unlikely to be passed before the current parliament ends in 2016. This will serve to deter oil majors from entering the onshore market, while the operations of firms with an existing presence or licensing agreements with Somali authorities will remain vulnerable to forced suspensions and delays due to security considerations.

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