Puntland Oil Mining Deal: The Offspring of an Affair btw Greed and Incompetence 'I'

[Xudeedi]

Puntland Oil & Mining Deal: The Offspring of an Affair between Greed and Incompetence (Part I)

 

By: Omar M. Abdi & Salah Fatah

 

 

April 28,2006

 

 

 

Imagine a group of greedy businessmen and their cohorts in a room with utterly incompetent representatives of a government in desperate financial situation. Throw in some cash in the mix and it is very likely that you will end up with something similar to the oil and mining exploration deal Puntland authorities signed with Consort Private, a disturbingly dubious company, with the consent and blessing of the TFG administration.

 

The essence of the deal is as follows: the regional administration of Puntland signed a concession agreement with Consort Private Ltd on August 30, 2005. The agreement gives Consort Private Ltd the sole and exclusive rights to all mineral and oil exploration, as well as development on and offshore in an area of approximately 212,000 square kilometers in Puntland. Consort Private sold 50.1% of their rights to Range Resources Ltd, a small Australian firm, which is trying to raise $3.45 million dollars to fund the deal.

 

Continue

[Duco Qabe]

The current problem of the Somalis these days is the leadership deficit syndrome that the entire nation is suffering from. We have to thank the authors of this article for shedding light at least partially on some of the issues involved in this so called Puntland minerals deal.

 

In my opinion the problem is not whether we exploit the natural resources of our nation but how utilize it in a fair and equitable manner that benefits the nation with out destroying the environment. Definitely Adde's regime which is so far the most corrupt administration that Puntland had since its inception is not the right admin to trust the job of exploiting our natural resources with.

 

The authors showed clearly the incompetence of Adde Musse's aministration and the companies involved who are nothing else but swindlers who have come to loot our resources.

 

Similar deals were also signed with the similarly corrupt and incompetent administration of Somaliland. Let us hope that we will come out of this with minimum damage and look forward to when our nation gets back on its feet.

 

Duca Qabe

[General Duke]

Apart from the title this is the usual garbage.

Puntland needs developemtn, if you have better ideas on how to attract foreign investement, I am all ears.

[Xudeedi]

Ducaqabe, I do agree that as a country, we aren't equiped with the right tools and persons to conduct such business of accountability.

 

I am really thankful to both of the authors for commencing the effort to cover and expose the hazy deals in Puntland, which resulted in the killings of dozens of people from the conflicting parties.

 

It is ironic that while the TFG and Puntland administrations were covering their tracks with pathetic secrets, their counterparts were making full disclosures of the deal in order to attract investors around the world [salah $ Abdi]

 

 

With the absence of government, every, the so called leaders, has such an excessive, all inclusize celerity of short-term goals of personal interest. I mean by this, their worst nightmare is to live to a moment of central adminstration where they will be held responsible for significant projects of national undertaking.

 

Such projects need a well-organized academician like Finance, Accountants, Lawyers, Managers, Engineers, from our people as well as Somalia gov.

 

Can warlords or charlatans carry out such task? They will facilitate the exploitation of our resources to Mafias and take the remnants.

[BoiBoi]

Duco,

 

Mark Twain once said:

 

“One mustn't criticize other people on grounds where he can't stand perpendicular himselfâ€

 

We have tackled this issue many times on many different threads, yet I have not heard an alternative solution?

[Xudeedi]

Boiboi, We have to expose everything first to the public. Somalitalk has done a great job unearthing all that is murky and educating the folks of their right to know everything.

 

Now, this is Part I of a longer discussion. A solution or proposal of what and what not to do can be reached after the untrustworthy persons or warlords in specific refrain from pursuing such an underhanded schemes that funnel money into their pockets.

 

The efforts that Reer Sanaag folks have made even if it took defending the lands under their conventional wisdom and proprietary rights, have born some fruits that led to the transfer of reserves by Range.

 

 

Let us look forward to conflict resolution mechanisms.

[Xudeedi]

Puntland Oil & Mining Deal: The Offspring of an Affair between Greed and Incompetence (part II)

 

Omar M. Abdi

Fairfax VA Laurel,

oabusa@yahoo.com

 

 

Salah Fatah

MD

sfatahj2@yahoo.com

 

 

May 09, 2006

 

 

If you were in a position to sell one third of Somalia’s underground natural resources, everything under the ground except water, how much would you sell it for? Would you seek the advice and consultation of your fellow citizens and listen to their concerns about the idea? Would you seek expert advice to guide you through the process and warn you of potential consequences of your decisions? Would you seek legal advice? These are some of the questions on the minds of many people regarding Puntland Oil and Mining agreement. In the second part of this article, we will present our opinions of the agreement and try to shed light on answers to some of the questions. We will try our best to provide corroborating documentation supporting our assessment. This approach is particularly appropriate when discussing financial aspects of the agreement.

 

Based on what we have learned so far about the subject matter, we strongly believe that the approach and leadership with which Puntland administration has handled this agreement was debilitated by ineptitude, greed, lack of vision, and was beset with arrogance and inflated egos. We identified three major flaws of the deal.

 

Strategic Flaws of the Agreement

 

The readers of Part I of this article know that few individuals at the top of the leadership in Puntland and TFG administrations signed an agreement which gave away over 90% of the ownership of oil and minerals in Puntland regions to a foreign company, Consort Private Ltd. This firm seems to exist only in name and has no business track in the world. The agreement is so unfavorable to Somalia that oil and gas industry experts were bewildered when its news was announced late last year. Steve Rothertham of EnergyView, an Australian oil and gas industry news magazine, wrote about it in an article titled “A Punt too far?†He interviewed Dr. Ali Abullaahi Barkadle, a Somali resource and management consultant living in Melbourne, who criticized the deal on several grounds. He said,

 

1. “The Puntland contract gave an unfair advantage to Consort Pvt Ltd and Range Resources by lumping together mining and oil concessions and giving the whole state – roughly 212,000 square kilometers – to a single company was unheard of.â€

 

 

2. “It seems the negotiators had a very limited understanding of the mining and oil industry or were in need of quick money.â€

 

 

2. “Puntland can be divided into many blocks using modern GIS systems. The area of 212,000sq.km is too huge for a viable study to be done on. Even multinational corporations with huge budgets for explorations cannot bite into such a huge cake without damaging shareholder value.â€

 

 

3. “Somalia had issued a number of concessions and prospecting licenses to a number of international oil companies in the 80s when Hunt Oil discovered oil in Yemen that protruded into Somalia. Ownership questions still remain since most of these companies declared force majeure.â€

A copy of the article is available at ENERGY VIEW

 

Environmental Flaws of the Agreement

 

One of the most awful aspects of the agreement is that it contained no provisions to address potential environmental problems associated with mining activities which could have severe negative impacts on the quality of land, air and water resources. These problems are widely recognized in the world and include:

 

* Watershed deterioration caused by increased erosion and runoff rates as result of large scale mining excavations. Rangelands, the backbone of livelihood in the region, are extremely vulnerable to this kind of damage.

 

* Mining related activities such as digging of underground tunnels and trenches can increase the risk of groundwater contamination. Human health concerns include hazardous substances disposed at surface which could find their way into the ground through these structures, thus, providing an easy migration pathway for contaminants to reach the groundwater.

 

* Unsafe waste disposal practices could be rampant throughout mining sites in the region due to lack of regulatory oversight. This could lead to wide spread dumping of chemicals and other toxic substances used in mining operations into the ground.

 

*Risk of massive land deformation due to collapsing of mining tunnels. This is particularly true if the design and operation of these structures are not planned and monitored carefully by qualified institutions.

 

* Lastly and most importantly, all of the above risks are likely to happen because Somalia has neither the environmental protection laws nor the qualified workforce and institutional support to oversee complex oil and mining operations in order to protect human health and the environment.

 

 

Failure to address these issues in a well thought-out manner carries the risk of ecological disasters which linger in the region for along time. The communities who live in areas targeted for contract works should be aware of the health and safety risks as well as economic deprivations to their land and way of life. If governments at all levels failed them, they do have a right to look out for themselves and they deserve the support of their fellow citizens.

 

We believe Range Resources has mixed feelings about the gross negligence by their Somali counterparts to protect human health and the environment. On one hand, they see it as a risk to the project since future Somali authorities could impose strict laws which could increase the cost of operations. On the other hand, they seem to use it as selling point to investors by mentioning that there are no regulatory requirements from local and Federal governments. In other words, this is a high profit project. A statement to this effect is mentioned in the prospectus document Range Resources put together to raise $3.45 million from investors in Australia and New Zealand. You can find the document at the link below. See Section 7.0 which discusses government regulatory compliance. http://www.rangeresources.com.au/ [sorry the site doesn't accept the pdf type link]

 

The above observations led us to believe that country is not ready to enter agreements such as the one signed by Puntland at this time, and the Somali public has the right to rise against the actions of few individuals driven by irrational greed and irresponsible behavior that endangers the lives of many citizens.

 

Financial Flaws of the Agreement

 

The flaws in of the agreement defy logic and common sense to the point one has to ask what were Somali representatives in the negotiation table doing. Who were they looking out for? Based on what we know now, they were there just to pick up the check. That is the only rational conclusion a reasonable person can deduce from their actions. There are a lot of speculations about how much money changed hands in this deal. We don’t know exactly how much money Puntland and TFG governments received for signing the deal, since the agreement between Puntland and Consort Private Ltd is a highly kept secret known to few. However, based on two documents released by Range Resources, we were able to make a reasonable estimate of the amount of money Range Resources will pay to Consort Private Ltd and Puntland/TFG administrations to get a majority ownership of oil and mineral rights in the region.

 

The payments made by Range Resources are in three categories. It is important to understand the differences and the value of each one of them to get a realistic sense of the actual money going to the payees.

 

Cash payments: Direct cash payments to the payee.

 

Company shares: These are shares paid upon Completion Date (after signing all necessary papers.) To calculate the value of these shares we obtained price of Range shares as reported by the Australian Stock Exchange and then converted it to US dollar using the exchange rate at the time of this article ( 4 cents per share, 1 Australian dollar=0.768332 US dollar). We don’t know when these shares can be exercised (sold). However Range did not put a time restriction on them, so we assumed they can be cashed at any time.

 

Company Share Options: These shares are subject to conditions which payee has to fulfill to the satisfaction of Range Resources. These conditions include but not limited to ensure contract work schedule is not interrupted/delayed and availability of third party investors to raise additional funds for the project.

 

The leaders of Puntland and TFG, based on our estimation, sold 1/3 of Somalia’s underground resources for the following benefits:

 

* A cash amount of about US $ 5.9 million.

About US $ 2.6 million in the form of Range Resources shares.

 

* About US 2.6 million in the form of Range Resources share options.

 

* A royalty payment of 5 to 10 percent of the revenue generated in production phase, if the deal gets that far. This means that the maximum benefit the Somali people can hope to get out of this agreement is 10% of the revenue.

 

It is possible that Consort Private Ltd will receive some of the above money, although an insignificant share. There is also a chance that Somali officials may never cash the share options in the amount of US $ 2.6 since it comes with a number of conditions which may not be fulfilled. Having said this, as of May 31, 2006 the total cash amount that would be paid to Puntland/TFG officials is about US $ 2.6 million excluding any payment from company shares and share options. We don’t know who the beneficiaries of the shares offered by Range Resources are. For its part, Consort Private Ltd will get most of its payment when 3rd party investors come on board. Not a bad deal for a one man company. See the tables below for details.

 

Payments to Puntland/TFG Administrations

 

Payment Description

 

Cash advance (refundable if Somalia/Consort side doesn’t meet their obligation to Range Resources). The obligation here was to sign the papers.

US Dollar: 1,500,000

Status: Paid

 

Cash ( to be paid when all agreement approvals or signatures are obtained)

 

US Dollar: 1,000,000

Status: Paid

 

Cash (17 monthly payments of 200,000 starting Nov. 15, 2005).

US Dollar 3,400,000

Status: Partially paid

 

85,000,000 Range Resource shares to be given at agreement completion date. These shares can be cashed in any time. The only condition was to sign the papers.

US Dollar: 2,624,800

Statis: Paid

 

85,000,000 Range share options. We don’t know what conditions are attached to exercise these shares. We believe these shares will be paid if third party investors come on board.

US Dollar:2,624,800

Status:Not likely to be paid soon.

 

Total 11,149,600

Status: Partially Paid

 

Source: Agreement between Range Resources and Private Consort. Please see Part I of the article.

 

Payments Promised to Consort Private after 3rd Party Investors come on Board

 

Payment Description

 

Cash (To be paid after Consort Private brings third party investors). We think that Puntland/TFG will not get the significant share of Consort Private payments.

US Dollar: 500,000

Status:Not paid

 

85,000,000 Range Resource shares to be paid after Consort Private bring third party investors.

US Dollar:2,612,329

Status:Not Paid

 

255,000,000 Range share options. Shares to be paid after Consort Private brings third party investors.

US Dollar:7,836,986

Status:Not paid

 

Total

10,949,315

Status: Not paid

 

 

Source: Agreement between Range Resources and Private Consort. Please see Part I of the article.

 

The source for royal payments is a document presented at Range’s annual company meeting in November 28, 2005. It contains interesting scientific details, unknown to many Somalis, regarding the prospect of oil in north eastern regions of Somalia. Range Resources acquired substantial data from former oil companies suggesting the existence oil reserves estimated at more than 500 million barrels. For details see the document at the link: http://www.www.rangeresources.com.au/docs/slide.ppt

 

Note: you need to download it first and then view it with Microsoft PowerPoint. Look at slide #16 for royalty payments.

 

 

Conclusion

We wonder if any other country has been robbed of its wealth as belligerently as the Puntland Oil and Mining Agreement did to the people of Somalia. An interesting analogy to this deal, in our opinion, is when the Dutch bought the island of Manhattan in New York in early 18th century from the native Indians for a bunch of beads amounting to 60 Dutch Guilders, which was later converted to about 24 US dollars.

 

Omar M. Abdi Salah Fatah

Fairfax VA Laurel, MD

oabusa@yahoo.com sfatah2@yahoo.com

 

 

Source: Wardheernews.com

[General Duke]

While it is good to criticise I really dont see the point of all this anger. I doubt that Puntland will back down on this issue...

[codetalker]

Only an incompetent, under-educated m.oron could sign on to a deal that's so detrimental to himself/his people. But what else have we noticed about Cadde's leadership style?

 

DUKE -

 

Listen, PL can back down peacefully or the clans can resort to militias. Cadde's choice.

 

But I guarantee you that no clan or sub-clan in Puntland will want its land explored and/or toxic waste dumped, simply because CADDE SAID SO! Which is you're excuse for blindly supporting everything Cadde or Col Yeey say.

 

Secondly, you're so convinced that Cadde will use funds from Range Resources for the socio-economic benefit of PL (as both parties claim). But consider this:

 

1. Range Resources executives have publicly spoken about the nearly $300,000 monthly payment they make to the PL gov't. Has Cadde or Afqurac spoken about this? No.

 

2. While Range/PL leaders (+ biased media) used cheap propaganda to tell us that Range would fund Garowe airport, the sad reality is that Boosaaso's airport hasn't been completed yet!

 

3. Where does the revenue from Boosaaso port + taxpayers go? I haven't seen the Cadde admin build a single school, renovate a single hospital, have you? So how come he hasn't used PL's own money (instead of "what if" money) to fund things that are for the social and economic benefit of PL?

 

The list goes on. He switched the debate in PL to the Range deal while he and his cronies continue to rob the hard-working citizens of PL earning an honest living. Neither corruption nor nepotism is new to Somali politics. But a soft leader like Cadde brought something new to Somalia: selling the land Allah SWT bestowed upon the Somali race to the cheapest Gaalo bidder around.

 

A disgrace and history will show him as that.

[General Duke]

Wind, Prove this deal is bad for the people of Puntland?

 

As for the clans, my position is clear no sub-clan can claim authority on the resources of the land. The clans in Puntland will not be allowed to claim for themselves what belongs to the state. I appreciate your concerns but dont hold your breath on forcing Cade by using the clnas will uprise line....No clan is uprising only a few individuals trying to cash on cheques that have not yet be written..

[art]

codetalker, the range donation to the building of the airport was only discussed about one month ago, I suggest to you that it takes more than a month to build an airport, this possibly being the reason that it is not yet complete.

 

With regards to the monthly payments to the PL administration, these are being done by Range as agreed, Range has no control of the funds once paid.

 

The range deal is purely an exploration deal,not a mining or oil producing deal. Once minerals ad oil of economic qualities are found then new agreements need to be drawn up.

[Xudeedi]

Code tallker, you really explicated dispassionately. Our brother Duke is blind to the reality. Abdusalam M. Jama "Salwe", a regional analyst will shed you more light Duke. He is not biased as he belongs to the same sub-clan of Adde Muuse.

 

Go to this feature analysis "Kalabayr" consist of seven (7) parts as of now from the date Puntland was established. It even updates with the current issues and conflict. Good Luck!

http://www.somaliawatch.org/feature.htm

[General Duke]

^^^ Makhir many thanks for that link, I will forward my thoughts on it soon..

[codetalker]

^

 

Some Web sites say Prime Minister Gedi now opposes Puntland's "right" to explore dhulka Soomaaliyeed:

 

"TFG oo ka xayuubisay DGPL xuquuqdii Shidaal Baadhista" - Laas Qorey Net

 

"DFKMG ah oo ganafka ku dhufatay heshiiska Shidaalka PL" - Garowe Online

 

Now, GENERAL DUKE, "if" this story turns out to be true, I expect you will support the TFG decision as you've always done, correct?

 

ART -

 

Range Resources is not funding an airport in PL. They're funding a war between brothers. Both Range and her cohorts/followers will loose their war against the Somali people.

 

That's all you need to know.

[Fiqikhayre]

Garooweonline.com and Laasqoray.net, I really should not be surprised.

 

We all remember to well, how they used to hyper up the conflict in Majiyahan! They simply flaud.

 

One is run by Mr. Dubious himself a.k.a. Minister without portofolio, who lives in his £250000 villa, that he financed through the generous help and support of the Puntland tax payers, that he so shamlessly utilised as his own during his hay-days of PL Finance Minister!

 

The other one is run by a bunch of worthless and ignorant fools, who oppose the government as they did not get a share this time around, but would not hesistate to become disloyal to their crucial goal and cause by the sight of green little $$$$$ dollor notes!

 

Last but not least to Mr. Code, stop the cheap propoganda and unreliable sources that you post, as they not worth the time and space, now get on with it!