Oil and gas in the political marketplace in Somalia

Joakim Gundel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The prospects around hydrocarbons (oil and gas) and future oil concessions have been accelerating in Somalia since 2012. The potential in this sector is already an important factor in political dynamics in the country, as seen for example in the ongoing maritime dispute with Kenya, as well as through the interests of several different countries and the involvement of a number of commercial actors. This memo argues that, while legislation and regulation, at least nominally, has been progressing in the last 3-4 years, it remains unfinished but now frames the operation of the political marketplace, with control over the Ministry of Petroleum and Somalia Petroleum Agency (SPA) constituting the key motivations of political elites and associated bargaining. Control of these ‘institutions’ enables access to informal flows of money as well as allows control over the allocation of sub-contracts, which are likely to come from the various grants and loans that will become available through the debt relief process. Control over contracts is a major issue in Somalia’s political economy and political marketplace. The memo highlights the underlying dynamics behind the regulatory developments and the push for – arguably premature – auctioning. It suggests that speculation is feeding the political marketplace in Somalia; speculation in future oil wealth (in the shortterm through foreign oil companies that are willing to pay access fees, rents and other inducements up front). In addition, speculation on the operational sub-contracts that exploration will generate (logistics, security, accommodation and hospitality). These drivers are elevated in the current pre-election period, where potential unconditional cash injections and the political trading around key positions – and the control or influence of contracts – in the emerging ‘institutions’ are important dynamics. The establishment of the federal government in Mogadishu, in 2012, has changed the organisation of this sector bringing it under a central authority where for years previously arrangements were made with regional authorities. In addition, past controversies associated with Soma Oil (Coastal Exploration) and TGS (Spectrum) still cast a shadow over the Somali petroleum sector and serve a useful purpose in highlighting the reputational risks of opaque engagement in this area and the need for proper regulation and oversight.

JEL-codes: E6 J01 R14 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2020-11-02
New Economics Papers: this item is included in nep-ene and nep-mac
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