Somalia: Puntland Oil and Mineral Development

[NASSIR]

Somalia: Puntland Oil and Mineral Development

Benefits and Risks from Socio-economic and Environmental Perspectives

 

by Ahmed Dirie, Ph.D.

November 28, 2007

The autonomous region of Puntland (North East of Somalia) has relatively succeeded in strengthening and protecting its young and fragile democracy from both internal and external threats (though currently shaken by Las Anod case) by establishing functioning public institutions and providing peace and stability to its people since its founding of 1998. After this modest achievement, Puntland leaders are aggressively engaged in setting off economic development programs, especially the extraction of natural resources (oil and hardrock mineral deposits) to generate “the much needed capital for development”. For that reason, the Puntland authorities signed a 50-year binding agreement in early 2005 with an Australian company (Range Resources Limited) for oil and mineral explorations, Range then subcontracted to a Canadian company (Canmex) for actual operations.

 

The contract was criticized by several observers because of the length of the commitment (50 years), jurisdictional disputes (Puntland Vs. Federal/Somaliland), and the lack of concrete project details. Range Inc. has released only a “two-page summary” of the contract for public reviewing ( www.range.com ) than a full project document. And the Puntland authority has released very few details.” In part the outcry stems from a lack of public outreach by both Puntland and Range Company officials to clarify concerns. In fact, there are some legitimate concerns that need to be addressed through in-depth studies, fair negotiations, dialogues with all stakeholders, and aggressive public relations efforts. The criticisms on Puntland-Range project published in Somali and international newspapers mainly focused on the legitimacy of the contract and politicking rather than addressing some of the crucial socio-economic and environmental risks associated with oil and mineral exploration and production projects.

 

Therefore, this feature will address and put on view the social, economic, and environmental concerns including bio-ecological impacts and ways to maximize benefits from the Puntland-Range project while minimizing the negative impacts associated with oil and mining industries. We will try to raise certain crucial questions and concerns to be considered in developing a comprehensive project document for win-win deal. In addition, this feature is intended for public education endeavor—educating policymakers, non-governmental and community leaders, general public, and all stakeholders about the benefits of environmental impact assessment (EIA) for extracting industries.

 

In definition, EIA means the process of identifying, predicting, evaluating, and mitigating the biophysical, social, and other relevant effects of development proposals prior to major decisions being taken and commitments made.” The purpose of the assessment is to ensure that decision-makers consider environmental impacts before deciding whether to proceed with new projects ( http://en.wikipedia.org/wiki /Environmental_impact_assessmen t )

 

 

To minimize the negative impacts of development projects, it is indispensable to institutionalize EIA plans as integral part of all development programs or projects. On top of that a detailed environmental impact assessment will serve as benchmark information for project monitoring and evaluations and also it will serve as a yardstick to measure what changes took place during project operations.

 

Thus, environmental impact assessment process must be incorporated into all project phases as monitoring and evaluation (M&E) tools—conceptualization, planning, implementation, and termination phases. Though, some projects are exempted in conducting EIA but natural resource extraction industries (oil and mineral extractions) are the worst environmental polluters and EIA must to be conducted. Early on, it is necessary to incorporate environmental impact assessment into the project planning phase of all extractive industries to mitigate social as well as environmental problems.

 

Before the Somali public can fairly evaluate the Puntland-Range contract, there are some questions need to be raised: was there a fair bidding and negotiations? Did the regional authorities make use of experienced consultants and negotiators to get a better deal for their people? And if not, is there a room for further negotiations? What are the corporate social responsibility and environmental records of the contracted companies? Was there an EIA conducted or planned before project implementation? Who is in charge in conducting EIA, environmental clean-ups, and restoration programs? Is there environmental insurance earmarked for environmental accidents? If the companies file bankruptcy, do we have an alternative measures for any social and environmental accidents? Are environmental regulatory policies and capable public institutions in place? And if not what are the options? These concerns could be answered through availability of detailed project document.

 

Achieving a Win-Win Deal for the Common Good

 

The main objective of developing Puntland’s natural resources is to improve the quality of life of Puntlanders and eventually that of Somalis in general. Any progress made to achieve that main goal would depend on methodical planning and genuine contract negotiations between the Puntland authorities and project proponents—in this case Range and Canadian Companies.

 

Despite the lack of accessible detailed project document or actual non-existence of such document, we strongly believe that we could learn from the historical and current experiences of other African countries in order to avoid settling with undue contracts and social and environmental catastrophes associated with oil and mining industries.

 

 

To start with profit sharing issues, there are African countries that negotiated better deals through experienced consultants and negotiators. For example, Nigeria and Angola had benefit sharing deals with oil companies of 80% and 60%, respectively. Whereas, Chad has only negotiated a 12.5% of oil profits than 28% (14.5% loss) if experienced negotiators were involved. Although, lucrative stream of oil revenues are not automatically translated into tangible economic gains for all citizens. Nigeria is an excellent example of where misuse of public resources has led to environmental devastations and brutal social conflicts ( www.nationalgeog.com ).

 

Socio-economic Benefits and Risks

 

The goal is not only getting the highest share of the oil profits but the wiser use of those profits for nation building. Nigeria has 80% profit deal with Shell Company for Niger Delta oil productions. Unfortunately, the Niger Delta is marred by deteriorating economic and environmental conditions, loss of precious human lives through conflicts over resources, kidnappings of project employees by armed local groups, and sabotaging of oil production facilities. Though, some of the armed conflicts are sponsored by local leaders, companies exploiting the natural resources, and individuals with vested interests—the brutal civil wars in Nigeria, Angola, Congo, and Sera Leon are partly fueled by profits from oil and mining projects as well as power struggle among locals.

 

Aside from misuse of resources, social problems or conflicts could arise from influx of job seekers from other regions and countries, proliferation of illegal businesses including human and drug trafficking (prostitution & alcohol-drug abuses), marginalization of local communities by urbanization of project site and its surroundings, if social safety-nets are not in place.

 

In balancing development and existing social structures, the best remedy is to organize community consultations, public hearings, and also to respect treaties signed with local communities—not abandoning all treaties when the project is in full swing.

 

To avoid probable social conflicts and environmental disasters, we strongly feel that there is an ample room for negotiations with communities and excellent window of opportunity for through planning since the Puntland-Range project is not operational yet. A well-thought planning would lead to wiser use of resources and oil profits for social wellbeing such as improvement of public education, health, economic diversifications, good governance, peace and stability, and establishment of social safety-nets including environmental protection fund or insurance for probable environmental accidents and pollutions.

 

Environmental Risks and their Mitigating Measures

 

Environmental accidents and pollutions could result from use of outdated and highly polluting technologies, misuse of oil and mining profits, and preach of treaties with communities. The probable environmental impacts from oil and mining industries are: dust and noise pollutions from project operations, air pollutions from continuous flaming of natural gas, leakage and damping of toxic wastes into water resources, displacement of local population and their livelihoods, and destruction of livestock grazing and wildlife habitats.

 

For Puntland oil exploration-production, these are the probable environmental concerns: disturbance of fragile wildlife and livestock grazing lands through clearance of access and transportation roads and urbanizations; rock debris or cuttings from oil-well drillings; unwanted natural gas through oil extractions; oil spills from pipelines and oil transportations; and illegal hunting and exploitation of wildlife by company employees and new immigrants.

 

For mining activities: disturbance of land surface by blasting mountains and digging up minerals; pollution of water resources by heavy metals (tailings); processing chemicals; and acid drainages and sediments from mining site.

 

However, there are some clean technologies for oil & mineral explorations and productions. But, knowledge and deeper understanding of available options in clean technologies is very important. In terms of oil drilling, disruptive multiple vertical drillings of wells could be replaced with single horizontal and diagonal drilling for several wells. The rock debris or cuttings could be properly stored or exported suitable handling facilities. At any cost, waste should not be damped into water ways or the ocean because it will cause human health risks and also affect fishing and nomadic communities. In the case of burning natural gas (flaming) through high towers, the natural gas could be re-injected into the well or extracted as separate product for use, instead of flaming it for years and polluting the air.

 

The same rules should apply in using less polluting technologies in mining and disposing wastes from processing chemicals and tailings, especially to avoid draining mineral processing chemicals into water resources.

 

Conclusion

 

Social, economic, and environmental concerns could be addressed by instituting environmental impact assessment (EIA) as an essential component of development programs. A detailed EIA document or report conducted by capable regional or federal agency should become a blueprint to follow in order to maximize benefits while minimizing risks associated with economic development programs. It is also advisable to engage neutral consultants or agencies to conduct EIA if there are no local professionals. But, it is indispensable to establish a governmental agency in charge of EIA processes through legislations and trainings of local capacity.

 

For instance, adopting preventive measures is wiser business policy since environmental accidents and clean-ups are very expensive in nature. Most of the big oil and mining companies have become environmentally conscious due to sky rocking clean-ups and compensations, public image concerns. Nowadays, it is a common practice for companies to allocate some resources (social and environmental fund) for environmental protection and working with local communities. Then one may ask; would the small companies contracted be responsible and able to deliver excellent services than big and experienced oil and mining companies? Would the Puntland and future Somali government authorities wisely use the profits from oil and mineral for tangible socio-economic developments and not for their personal and political ends?

 

To sum up, the jury is out there for Puntland-Range oil and mineral project. To the Somali professionals and intellectuals, it is our responsibility to protect the interests of our people by sharing our skills and knowledge with our policymakers for better governance—to constantly put up constructive criticisms and enlightening views.

 

 

Source: Development Narrator Magazine www.dn-sottedi.org