Kuwait set to cash in on Somali oil deal

Kuwait Energy Company and Indonesia's PT Medco Energi Internasional Tbk are to acquire a 49% stake in Somalia's first state petroleum company, according to documents.
Kuwait set to cash in on Somali oil deal
By Administrator
Sat 11 Aug 2007 12:00 AM

Kuwait Energy Company and Indonesia's PT Medco Energi Internasional Tbk are to acquire a 49% stake in Somalia's first state petroleum company, according to documents.

The government papers, entitled Somalia Petroleum Policy, indicate that the two companies would acquire their stake in Somalia Petroleum Corporation on August 31.

The move, however, depends on a national oil law being passed that is currently awaiting parliamentary debate, analysts say.

Prime Minister Ali Mohamed Gedi is believed to be keen to see the draft law governing oil and gas exploration in the fractured Horn of Africa country enacted quickly. The bill was approved by his council of ministers in February.

The documents also state that Somalia's petroleum minister would approve three out of seven directors to the new company - two from Medco and one from Kuwait Energy.

There are seven officials from those companies listed in the documents as advisers to the government, including Medco President Hilmi Panigoro and Kuwait Energy CEO Sara Akbar.

Under a sliding scale production-sharing agreement, the government and state companies would earn US$1.2bn, or 69% of revenues if 50 million barrels were extracted at US$50 a barrel.

If output rose to 350 million barrels, the state would pocket US$9.1bn, or 72.8%, according to a spreadsheet in the documents showing revenues minus total cost.

The documents set out acreage-based rental payments of US$100 per sq km.

Government officials were not immediately available for comment.

Oil has become increasingly controversial in Somalia where experts say a power struggle has emerged between President Abdullahi Yusuf and Prime Minister Gedi over exploration rights.

Somalia remains a speculative bet for oil exploration with no proven oil reserves, according to the US Energy Information Administration, and only 200 billion cubic feet of proven natural gas reserves.

However, in the 1980s Western oil majors including ConocoPhilips, Chevron and Total held exploration concessions in Somalia, but decided to leave when the nation descended into chaos in 1991.

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