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Global Energy Advisory – 7th November 2014

Politics, Geopolitics & Conflict

We are closely monitoring oil developments in Somaliland, which threaten to cause instability in northern Somalia. Somaliland’s separatist administration is proposing an Oil Protection Unit (OPU), which could trigger all-out armed confrontation between Puntland and Somaliland over the disputed territory of Sool. A UN monitoring group is calling for the cessation of all commercial activity in the oil sector due to looming threats. The brewing conflict stems from Somaliland’s granting of oil exploration licenses to foreign companies—including Genel Energy, Rakgas, DNO and Ansan Wikfs—which is being challenged by the Somalia Federal Government and Puntland. Somaliland is planning to provide armed protection for oil workers here, and there is the risk that the unrecognized Somaliland will violate an arms embargo to do so and spark an armed conflict with Somalia and Puntland. These oil companies have jumped the gun on Somaliland oil, and our assessment is that this will most likely end in conflict in an area already wracked with violent instability. The flashpoint, Sool, is extremely tense. Somaliland troops seized a village in Sool in April, taking control of strategic oil-rich targets. In August, clan militia attacked foreign oil workers working for DNO near Sool. The battle for the control of Sool and Sanaag in northern Somalia has continued on and off since 2000.

In Ukraine, separatist elections indicate what was already becoming a foregone conclusion: The central government in Kiev has lost control of the region. On Sunday, 2 November, votes were held by pro-Russian insurgents, installing rebel militia leaders as prime minister of two self-declared republics in the east, Donetsk and Lugansk. These two areas plus the already lost Crimea represent about 15% of Ukraine’s population (counting those who fled).

Development Focus: Kenya

Tullow Oil has encountered oil shows in its Kodos-1 exploration well in the Kerio Basin, but there are mixed sentiments on this, while a planned pipeline with Uganda—which will be a game-changer for explorers when production goes commercial—has received a boost with World Bank funding.

For Tullow, which made the first major discovery in Kenya in 2012, blessings have since been mixed. In late October, the company said it had drilled Kodos-1 to a depth of 2,500 meters, encountering oil showings of mixed quality alluvial sands.…




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