Oil Majors Weigh Up Risks of Beginning Operations in Somalia

In 2011-12 African forces, backed by the US, drove al-Shabab, the main Islamist force in Somalia with strong ties to al-Qaeda, out of Mogadishu, and seized many of its urban strongholds around the country. Since that time militant forces have stuck to rural Somalia, waging a guerrilla war of hit and run attacks, and suicide bombings.

Considering moving into this warzone are global oil companies, desperate to explore for potential oil and gas deposits and continue the success of the East African oil boom.

The Financial Times wrote that “the world's leading oil companies are increasingly accepting that their quest for new reserves will take them into challenging new territory.

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In regions such as the arctic, the problems are technical. Around the Horn of Africa, companies must calculate whether political and security risks will put too heavy a burden on their production costs.

This is hazardous territory in which to operate.”

East Africa has recently experienced lots of success with major oil discoveries made all the way down the Indian Ocean coast to Mozambique. Finding oil could indeed transform Somalia’s economy, but it might also supply more cash to militant groups and step the conflict up to the next level.

Just the act of making deals with Mogadishu could even be enough to see violence increase as the central government’s power over the country is far from complete, with many territories outside of Mogadishu’s rule.

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The FT explained that after the dictator Siad Barre was toppled from power in 1991 “warlords carved up the country -- and several clan-based militias still hold sway, sometimes cutting deals with al-Shabaab.

The danger is that the race for oil will feed a destabilizing rivalry between Mogadishu and other regions just as the international community is celebrating progress.”

By. James Burgess of Oilprice.com