Serious Fraud Office has announced an investigation into allegations of
corruption in Somalia against British company Soma Oil and Gas Limited,
following a raid last Wednesday on the company’s London offices (1). Global
Witness has been investigating the case, and is calling for the Federal
Government of Somalia to cease striking new oil deals until open and
transparent contracting systems and revenue sharing agreements are put in place
to manage the country's natural resources.
Former Conservative Party leader Michael Howard is Chairman of Soma Oil and Gas. Although no allegations of corruption have been made by the SFO against Mr Howard personally, concerns have previously been raised over the role of the British Government in encouraging Mr Howard’s appointment to the Soma board, and over Mr Howard’s request for ministers to meet with Somalia’s minister for energy as “a favour” (2).
The deal was signed in August 2013, shortly after the UN Monitoring Group called for a moratorium on all new oil deals in Somalia, citing concerns they could fuel instability in a volatile region. The deal requires Soma Oil and Gas, a company started just months before signing, to conduct seismic surveying off the coast of Somalia in exchange for first choice of up to 12 offshore oil blocks, a significant proportion of Somalia’s offshore territory. The contract and other terms of the deal have not been made public and have not be disclosed to the Somali parliament, raising questions over the value of the deal for the Somali people, and who its real beneficiaries are.
“There are few better examples of the dangers of oil deals being done behind closed doors in fragile regions,” said Barnaby Pace, Campaigner at Global Witness. “A major contract signed during a time of instability with a company without much track record or enough funds at the time of signing raises all sorts of alarm bells. Clearly, we need to know what the substance of the allegations investigated by the SFO is, and what role Michael Howard and others might have played. But more broadly, the Government of Somalia needs to open up about how it awards contracts intended to help rebuild the economy, and extractive deals need to be conducted openly so that their citizens all over the world are involved in such critical decisions.“
There are also concerns that “capacity building payments” made by Soma Oil and Gas to staff in the Federal Government of Somalia oil ministry could create substantial conflicts of interest if those staff are involved in managing or negotiating Soma’s contract. In addition, in December 2014 it emerged that a director and shareholder in Soma Oil and Gas, Mohamed Ajami, was under investigation by the US Department of Justice and Securities and Exchange Commission. The Wall Street Journal reported that authorities were examining whether Mr Ajami made payments constituting bribes to persuade the Gaddafi-era Libyan Investment Authority to invest $300m of the country’s oil money with the hedge fund Och-Ziff (3).
The company has stated this weekend that “Soma Oil & Gas can confirm that it has been informed by the Serious Fraud Office (“SFO”) that it is investigating an allegation that has been made against the Company. Soma Oil & Gas is confident that there is no basis to the allegation and it is co-operating fully with the SFO to answer its queries. Soma Oil & Gas has always conducted its activities in a completely lawful and ethical manner and expects this matter to be resolved in the near future” (4). Soma has also told the media that "The SFO have confirmed that no suspicion whatsoever attaches to Lord Howard arising from the business of Soma and his role as a non-executive director of the company and he has agreed to speak with the SFO to help resolve their enquiry as quickly as possible,"
“There is a real danger of predatory oil companies snapping up Somalia's natural wealth. Until there is a consensus in the country about how natural resources should be transparently and effectively developed to benefit the country’s wealth, a dash for oil may do more harm than good. Until that time all parties should heed the UN Monitoring Group’s call for a moratorium on all new oil deals in Somalia,” said Pace.
Notes to editor:
1) See here for the full statement from SFO.
2) A letter seen by Global Witness shows that Michael Howard wrote to Michael Fallon, then Minister for Business, asking him to meet with Somalia’s minister for energy when he came to London “to discuss the challenges of developing a hydrocarbon regime”. Howard also begins the letter by saying “Dear Michael, I’m afraid another request for a favour. I am Chairman of Soma Oil and Gas Limited, an appointment I accepted with the encouragement of the FCO [Foreign and Commonwealth Office].” At the time the FCO told the Independent that it made absolutely no such encouragement, and never would. Meanwhile Lord Howard told the Independent newspaper that he had met with the Foreign Office for a briefing on the government’s policy towards Somalia and that at this meeting the FCO had reassured him that Britain and Soma’s aims were at one. Howard stated that it was a mistaken interpretation to think the FCO had “encouraged” Howard’s appointment to the post by the Foreign and Commonwealth Office or that the FCO or Department of Business is “on side” with Soma Oil and Gas.
4) See here for statement
5) FTI Consulting were not available for immediate comment
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