• UN Monitoring Group wants moratorium because of lack of laws
  • World Bank working with government to develop regulations

Somalia opposes a moratorium on oil deals that’s being discussed at the United Nations as a way of stabilizing one of the world’s most fragile states, Finance Minister Mohamed Adan said.

A new UN Monitoring Group report on Somalia, to be released in mid-October, will repeat a recommendation first made in 2013 that the Security Council ban any oil deals in Somalia. The group argues that the country lacks a legal and regulatory framework to oversee the exploitation of energy resources.

“It’s a sovereign issue,” Adan told reporters Friday in the Kenyan capital, Nairobi. “We will not welcome a blanket oil moratorium.”

Soma Oil & Gas Holdings Ltd., a London-based company that’s spent $40 million conducting surveys off the Horn of Africa nation’s coast, has asked the British government to help block the proposal.

Somalia hasn’t had a functioning central government for the past quarter century as it’s been wracked by civil war and an insurgency by al-Qaeda-backed Islamist militants. The African Union has deployed about 22,000 peacekeepers to help government forces stabilize the country. Gains against the insurgents since August 2011 have enabled the government to begin exerting its authority over southern and central areas.

Revenue Deal

Soma has previously proposed a deal with the Somali government that may grant it as much as 90 percent of the country’s prospective oil revenue. The company has said that any deal with the government will include terms that are “fair and balanced.”

“We will not go ahead with any profit-sharing arrangement without the proper legislation and policy framework," Adan said.

The World Bank is advising Somalia to put regulations in place to ensure oil resources benefit its citizens, Bella Bird, the Washington-based lender’s director for Somalia, said in an interview.

“The government has set up a mechanism called the financial governance committee which is reviewing concessions, that’s a very important innovation," she said.

Soma is being investigated by the U.K.’s Serious Fraud Office over allegations of corruption in Somalia. The company denies any wrongdoing and said the UN monitoring group “fundamentally misunderstood” a capacity-building program in which salary payments totaling almost $500,000 were made to Somali oil officials.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE