China Oil Company Representatives Visiting Puntland

May 30, 2008 (Garowe Online/All Africa Global Media via COMTEX) -- CEO | Quote | Chart | News | PowerRating -- Representatives from a Chinese state-owned oil company are currently visiting parts of Mudug region, in Somalia's semiautonomous State of Puntland, sources said.

The representatives from the China National Offshore Oil Corp. (CNOOC) were accompanied by unidentified Somali nationals and Puntland officials as the delegation toured parts of northern Mudug, the home region of interim Somali President Abdullahi Yusuf.

Somalia's leader inked a secretive agreement with CNOOC in May 2006, but critics have accused President Yusuf of violating the country's constitution by failing to present the oil deal to lawmakers for ratification.

Somali President Yusuf [left] and Adde Muse, the leader of Puntland

According to sources in Galkayo, the capital of Mudug, members of the CNOOC delegation also includes representatives from the China International Oil and Gas (CIOG), a smaller company that was included in the original May 2006 agreement with the Somali President.

Confidential sources in Galkayo and in the nation's capital, Mogadishu, tell Garowe Online that members of President Yusuf's family are CIOG shareholders, with their total investment estimated to be around 20% of the company.

The Chinese company officials' arrival in Puntland coincides with the landing of exploration equipment at the port of Bossaso last week.

The equipment belongs to Canada's Africa Oil Corp., a relatively small oil company that has reportedly began exploration activities in an area east of Bossaso as part of a January 2007 agreement with Puntland President Adde Muse. [ Full story]

To date, Somalia does not have a comprehensive national oil law that would govern the management of the country's natural resources. Former Prime Minister Ali Mohamed Gedi, who introduced an oil law to parliament last year, eventually resigned after falling out with President Yusuf over oil contracts.

Somalia, on the eastern tip of Africa's Horn, has been mired in political anarchy since 1991 when the country's last effective ruler was overthrown by armed clans.

Thousands of Ethiopian troops invaded parts of Somalia in December 2006 to protect President Yusuf's weak government in Mogadishu, which has been unable to exert much control except for a few neighborhoods in the capital.

Critics of the ambitious exploration project have criticized Puntland leader Muse for lacking the constitutional authority to sign exploration agreements with foreign companies, arguing that Puntland is a region within federal Somalia.

Others quickly point out that Somalia is ill-prepared for oil exploration, especially in light of the ongoing anti-Ethiopia insurgency that has razed whole areas of Mogadishu and other parts of the country.

Some of Somalia's armed clans, who have fought bitter wars for nearly two decades over land ownership and control of resources, are militantly opposed to President Yusuf's interim government, especially in the southern regions where new Prime Minister Nur "Adde" Hassan Hussein hails from.

But the Prime Minister has not addressed the key issue of oil contracts since his appointment nearly seven months ago.

Observers worry that oil exploration will add more fuel to a raging fire, reigniting old clan hostilities and pose a greater threat to the success of President Yusuf's Western-backed interim government.

Morning Coffee with TradingMarkets -- Free Newsletter

More News:   Market Updates | Stock Alerts | All Trading News | Stock Index