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U.N. Monitors Concerned Over Somaliland's Plans for Oil Security Force

Breakaway Somalia State Plans Privately Funded Force to Guard Oil Companies' Operations

http://online.wsj.com/articles/un-monitors-concerned-over-somalilands-plans-for-oil-security-force-1401471420

By JUSTIN SCHECK CONNECT
May 30, 2014 1:41 p.m. ET
LONDON—A United Nations group expressed concern this week about plans by a breakaway Somalia state to create a privately funded security force to guard oil companies' operations, according to an internal U.N. document reviewed by The Wall Street Journal.

Companies including Norway's DNO International AS DNO.OS +0.92% A and Genel Energy GENL.LN +1.04% PLC—a small British company headed by Tony Hayward , BP BP.LN +0.50% PLC's ex-chief executive and the current chairman of mining giant Glencore GLNCY -0.84% PLC—have signed deals with the government of the state of Somaliland to explore for oil. Somalia's Mogadishu-based central government says the deals are invalid on the grounds that regional governments like Somaliland's have no authority to sign such agreements.

In a May 27 letter to a U.N. Security Council committee on Somalia, the U.N.'s Somalia and Eritrea Monitoring Group said Somaliland's government has exhibited "poor transparency" in reporting the money that it has received from oil companies and "weak regulation" in its process for forming an armed force to guard oil companies' exploration operations.

"That is hogwash to say there is no transparency," Somaliland Resources Minister Hussein Abdi Dualeh said Friday in an interview. He said the government has published the signing fees it collected over the past year or so, including $750,000 from DNO and $1.8 million from a Yemeni firm. The security force, he said, would be headed by the state's interior ministry. The interior minister didn't return messages Friday.

A DNO spokesman didn't return messages Friday. A spokesman for Genel said the company supports the creation of an oil-protection force in Somaliland.

The breakaway state has been trying for several years to develop a local oil industry. Somaliland has long been more stable and peaceful than the rest of the country, and its officials have chafed at being controlled by the nation's Mogadishu-based government, which has focused on tamping down terrorist groups in recent months.

Several small, risk-happy oil companies have looked to Somaliland as a promising frontier, striking deals to explore areas that big oil companies had exploration leases on dating back to the 1980s. While some of those companies have objected to the overlapping leases, the small firms moved ahead with their projects. But in September, Genel suspended its operations due to a security threat.

Since then, Somaliland's government has hired at least two private companies to prepare reports on how the country could develop an oil-protection force, including one paid for by Genel, the UN letter says.

The most recent report, which Somaliland officials say they are following, suggests Somaliland create a force that is "government-owned but commercially operated," and staffed by 580 members of the Somaliland police force and army, the U.N. group's letter says. The Journal hasn't reviewed that report, but Somaliland officials have confirmed its content.

The force would have startup funding from an outside group—possibly a commercial investor or humanitarian fund—and have its operations paid for by oil companies operating in the country, the letter said.

The monitoring group said that without protections, that plan could make Somaliland's government "vulnerable to undue influence" from private companies or lenders backing the oil-protection force.

To avoid violating a U.N. arms embargo, the letter said, Somaliland would have to get support for its plan by a U.N. member state to request an exemption from the embargo. It is unclear whether the U.N. Security Council would grant such an exemption.

The Somalia monitoring group's coordinator, Jarat Chopra, declined to comment Friday, as did a representative of the U.N.'s Somalia committee. Mr. Dualeh, the Somaliland resources minister, said his government hasn't begun the process of seeking an exemption from the arms embargo.

Write to Justin Scheck at [e-mail]