Proceeds of Gas and Oil should benefit the people of the Somali Region

02/17/07
    

The Somali region of Ethiopia is rich in natural resources in oil and gas,though, there isn't a large scale industrial production yet. Most of the companies awarded contracts in the Ogaden basin which is about 350,000 square kilometres, are in the exploration or survey stage.

The Ogaden basin in the Somali region has proven reserves of gas estimated currently at 114 billion cu.m. However,most experts agree that this is just a fraction of the total potential gas fields, most of which are not yet fully explored.

There are more than 20 foreign companies which have been actively vying for contracts whether it is exploration or production in the 20 blocks in basin. Petronas, Pexco, Lundin and South West have concession areas in the Ogaden basin. However,Petronas, a Malaysian company has won most of the prominent contracts and has paid close to 500 million U.S dollars as pre-development costs and concessions to the Ethiopian government. The government says that it will use this money to develop other Gas and Oil fields.

There is very little transparency in the whole process and it is not clear if administration of the Somali State is involved in the negotiation of the contracts. Attempts to find out how much the Somali region administration is involved in the concession of the contracts and future proceeds of the Oil,Gas exploration and production, has been difficult. Neither federal officials nor the regional administrators would speak to kilil5 about the awarding and concession of future proceeds of these contracts.

We understand that most of the contracts involve the initial exploration of the Oil and Gas fields. But, it is clear that, the federal government has signed long term production contracts and concession with most of these companies and we have every right to know what these contracts entail. Natural Gas and Oil are the two biggest resources of our Somali State and we want most of the proceedings to go to our Somali region. Our people are lagging behind the rest of Ethiopia in every phase of development. It is Oil and Gas that our region is banking on, to lift it out of the poverty, and into the twenty first century.

Petronas has already proposed to construct a gas processing, production plant and a gas pipeline that stretches from the gasfields to the port of Djibouti. The company also proposed to drill additional wells in Calub and Hilala. So far ten wells in Calub and four in Hilala were drilled. The company is investing more than 2 billion U.S dollars in building the plant and the piple line to transport the Gas to the port of Djibouti for export to Europe and to the United States.

The Somali state administrators don't seem to understand the value and the significance of these contracts to the region or they are not willing to speak openly,fearful of the federal officials. My gut feeling, knowing their incompetence and their total disregard for the welfare of the region, is that, they are just going along with whatever they are being fed by federal officials, without being really involved negotiating on behalf of the region. It seems, the region's administrators are afraid to inquire what is in it for the Somali region, in any of these contracts.

The federal government shouldn't be the only body constructing or awarding the exploration and production of Oil and Gas in the region. The people of the region deserve to have a voice in the awarding of any concession, their most significant resources. The process has to be open and the regional administration must be actively involved in the whole process. The region's future depends on the revenues from Oil and Gas production. There must be an open process so that the region knows what percentage or share it will receive from any sale of Gas or Oil before any of the companies begin to produce their most important resources.

There must be a clear distinction here the interest of the federal government and that of the region. Every Contract and concession must clearly define and say what percentage shares will go to the Somali region and to the federal government coffins. The citizens of the Somali State will not accept a notion which doesn't say clearly what percentage of the revenues will go to our region without going through the federal government coffins. Every Oil and Gas producing areas anywhere in the world, have a defined portion of revenues earmarked to the oil/gas producing regions and their inhabitants. We are not going to be an exception and we expect to receive the bulk of the revenues.

Kilil5 Editorial.