Somalian PM Hopes to Tempt Oil Majors Back with Oil Law

LONDON Apr 13, 2007 Dow Jones Newswires

Somalian Prime Minister Ali Mohamed Gedi hopes big oil companies will return to the country and said parliament is set to vote on a petroleum law to encourage this by providing a legal framework.

Gedi told Dow Jones Newswires last week: "The parliament will approve the law within two months."

Large oil companies were awarded acreage before the country's government collapsed in 1991 but have yet to return owing to years of political instability and violence.

To get their contracts confirmed, the companies "will have to comply to the terms of concessions agreements" demanded by the law, Gedi said.

He emphasized that the law stipulates contracts will be production-sharing agreements. These require companies to share their production with governments after they recover their costs.

Asked whether contract holders had expressed any interest in returning, the prime minister said: "We have the information that they are interested," but declined to give any names.

But until the law is passed, "they have to wait and see," he added. The law will come into force as soon as it is approved by the parliament, Gedi said.

Royal Dutch Shell PLC (RDSB.LN), Phillips, now part of ConocoPhillips (COP) and Chevron Corp. (CVX) were awarded exploration acreage before 1991. Eni SpA (E) also has licenses in the country, though it's unclear when they were granted.

A person close to Shell said the company "is monitoring the situation" and a Chevron spokesman said it didn't intend to return to Somalia. Eni and ConocoPhillips didn't return requests for comment.

A spokeswoman for Total SA (TOT) said the company signed a technical agreement with the Somali government in 2001 to conduct seismic work offshore but that the security and political situation has so far prevented the company from implementing the contract.

Recent fighting that pitted Somali government troops and their Ethiopian allies against Islamist insurgents killed more than 1,000 civilians and wounded 4,300 in the capital Mogadishu, according to a committee assessing damage from the worst fighting in more than 15 years, released Monday.

The insurgents are linked to the Council of Islamic Courts, which was driven from power in December by Somali and Ethiopian soldiers, accompanied by U.S. special forces. The U.S. has accused the Islamic group of having ties to al-Qaida. Washington has also accused neighboring Eritrea of supporting the Islamic Courts.

The Courts stockpiled thousands of tons of weapons and ammunition during the six months they controlled Mogadishu. The insurgency will likely last until that stockpile is depleted, or key leaders are killed.

The militants have long rejected any secular government and have sworn to fight until Somalia becomes an Islamic emirate.

Experts fear the conflict in Somalia could engulf the region.

Somalia has been mired in chaos since 1991, when warlords overthrew dictator Mohamed Siad Barre and then turned each other. A national government was established in 2004 but has failed to assert any real control.

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