Analysis: Coastline’s claim of new oil production-sharing deal with Somalia is its final roll of the dice — and it’ll likely fail

By The Star Staff Writer

MOGADISHU — The new claim by Coastline Exploration — a puny, U.S.-based company — that it has revived a defunct oil production-sharing deal with Somalia’s government and paid US$7 million signature bonus after securing the “support” of President Hassan Sheikh Mohamud is largely similar to its earlier tactics of arm-twisting Somali officials into giving it a head start over more powerful companies in the rush to tap the country’s oil and gas resources.

Coastline tried the same bootless strategy with the previous administration that refused to grant the Houston-based company the right to explore oil and gas in the country.

In a letter dated March 8, 2022 and obtained by The Somalia Star, Coastline protested the Somali government’s rejection of its deal with former Petroleum Minister Abdirashid Mohamed Ahmed, arguing, without providing any evidence, that “the terms” of the production-sharing agreements it signed on Feb. 19 were “legal, valid, binding and enforceable upon the Federal Government.”

Coastline claimed on Friday that it had “received final authorisation for it to proceed with its exploration programme from the competent authorities within the Federal Government of Somalia (“FGS”).”

“As a result, in line with the terms of the PSAs [production-sharing agreements], Coastline has paid the agreed US$7 million signature bonus to the Somali Central Bank,” it said in a statement, noting that the deal came after “an in-depth review” on the February agreement.

Coastline’s desperate, final attempt to roll the dice with President Hassan is likely to fail.

The president, who has no legal authority to cut such agreements with foreign entities without parliament’s approval, didn’t publicly comment on Coastline’s claim, although the company claimed in a statement that the head of state thanked it for its commitment to Somalia.

“The Federal Government will do all it can to support this project and we want the first exploration well to start as soon as possible,” the president said, according to a statement from Coastline. “Today marks a major step forward for Somalia as we look to develop our energy industry which should deliver material benefits for all Somalis. Energy independence, new tax revenues and further foreign investment in Somalia now beckons.”

The new claim by Coastline is so dubious that even government-run media have not reported it. It’s far from clear whether Prime Minister Hamza Abdi Barre, who is in Ethiopia, is aware of the deal or was done behind his back. There was no video or photographic evidence showing that a new deal was signed on Friday, a holiday in Somalia. One of the photos shared by Minister of Petroleum and Mineral Resources Abdirizak Mohamed showed him taking notes during his meeting with Coastline officials.

In what appeared to have been a choreographed operation, mainly conducted on the Twittersphere, the country’s Petroleum Authority said in a tweet that it’s “pleased to announce that following the signing on the 15th of February 2022, the seven Production Sharing Agreements (“PSAs”) with Coastline Exploration have now been confirmed by the Federal Government of Somalia.”

Neither Somali officials nor the Coastline’s statement mentioned the auditor general’s invalidation of the Feb. 15 deal, which was also disallowed by then-President Mohamed Abdullahi Mohamed “Farmajo” and then-Prime Minister Mohamed Hussein Roble.

Auditor general’s office last February called the deal “a major danger to the ,Somali people’s natural resources.”

“The office (the auditor general) concluded after a review that it [agreement with Coastline] clearly flouted the provisional Constitution of the Federal Republic of Somalia,” said the auditor general in a statement on Feb. 20, 2022.

A day earlier, on Feb. 19, former Petroleum Minister Abdirashid Mohamed Ahmed surprised the nation with a shock announcement that the Ministry of Petroleum and Mineral Resources and the Somali Petroleum Authority signed seven production sharing agreements with Coastline Exploration Limited “to launch the exploration for hydrocarbons offshore Somalia”, where oil and gas exploration started in the early 1950, with Shell, Exxon, BP, Total and Chevron being the first companies attracted to the country.

He said the agreements “will have an immediate positive impact on the Country” and are “expected to generate tens of millions of dollars in revenue for the Federal Government, its members’ (sic) states, and the local communities in the form of signature bonuses, training, community, and rental fees.”

“This is a huge moment for Somalia,” declared Ahmed in his two page statement.

Former President Farmajo and his Prime Minister Roble rejected the deal.

In fact, the Somali government had many reasons to object to the Coastline’s deal. The company, which was started in 2018, is a blip on the global oil industry. It has no history of working in another country, and Somalia’s deal, whose legality is now doubtful, is the only one it’s ever gotten to carry out oil and gas explorations, a fact that raised concerns among many Somalis who fear that the company could, in effect, prove an impediment to their country’s hydrocarbon development in the long run.

Reports of Coastline’s tireless push to get the Feb. 15 agreement officially approved by Somali leaders emerged immediately after May. 15, when 214 lawmakers elected President Hassan.

On May 28, The Somalia Star exclusively reported that outgoing Prime Minister Roble was looking for a way he could legally accept the roundly rejected secret agreement with Coastline.

According to The Star’s reporting, foreign lawyers told Somalia’s ministry of foreign affairs that the agreement had become invalid the moment it wrote official letters rejecting it. Foreign Minister Abshir Omar Jama “Huruse” and his office didn’t so far issue any statement on the new development.

On May 31, a British man, whose Linkedin profile says he’s a “master” of messaging and external communication, sent an email containing responses from Coastline Exploration to the Somalia Star journalist who wrote the story about Roble’s attempt.

“Coastline Exploration is committed to Somalia and is not in a hurry,” wrote George Hudson, who claimed to “handle the public relations for Coastline Exploration,” a little-known company, formerly company formerly called Soma Oil.

“It is here for the long-term having been involved in the country for a number of years already and it plans to stay in Somalia for many more to come,” Hudson wrote to The Star journalist.

Mohamud Mashruuc, the State Minister of Petroleum and Mineral Resources, said his ministry “has officially reviewed the Production Sharing Agreement according to legal Advice from experts.”

“Amendments have been made and signed by both Minister @AbdirizakOmand the CEO of Coastline Exploration @coastline_explo. #Somalia is ready for investment! @TheVillaSomalia,” said Mohamud in a tweet without disclosing the new amendments.

In another Twitter message, the country’s Minister of Petroleum and Mineral Resources Abdirizak said the new Production Sharing Agreements are “consistent with good international practice in host government contracts that adopt the production sharing structure.”

He predicted that Coastline would “immediately start the exploration phase as per its work commitment.”

Abdirizak thanked Hassan for “his confidence” in him, saying the “deed of amendment” was signed after extensive review of the PSAs with Coastline and in consultation with the attorney general and international legal advisors.

The minister didn’t says how Coastline would operate in the country without lawmakers’ approval of the agreement, which has been shrouded in secrecy.