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Source: www.asiaecon.org |

CHINESE COMPANY INVESTS IN SOMALIA


Chinese giant corporation, CNOOC, has been granted legal permission from Somalia to excavate for oil. This is a step forward towards a more integrated China in Africa. Also, it shows China's desperate need for alternative energy sources, other than that from the Middle East, and the extent by which it is willing to risk security for energy since Somalia has a long history of political instability.


Chinese giant corporation, CNOOC, has been granted legal permission from Somalia to excavate for oil. This is a step forward towards a more integrated China in Africa. Also, it shows China’s desperate need for alternative energy sources, other than that from the Middle East, and the extent by which it is willing to risk security for energy since Somalia has a long history of political instability.

According to the Middle East Times, officials from both sides met in Nairobi to discuss the details and time line of this project in 2007. The project was initiated in September of the same year.

Energy giant, CNOOC, is the largest company in China in the field of oil and gas excavation. The company has previous experience operating in Africa. In the late nineties, CNOOC was extracting oil from southern Sudan despite an ongoing civil war.

Rising Chinese presence in Africa is commonly observed. Indeed China intends to secure its economy’s fuel by taking higher risks in investing in highly unstable African countries. Somalia, which has held a peace conference in its capital Mogadishu, had been a no-go area for U.S. oil companies since it descended into anarchy in the early 1990s. The current interim government is now promising to bring peace and stability for the first time in decades.    

Somalia has no proven oil reserves and only 200 billion cubic feet of proven natural-gas reserves. Companies, including Agip, Shell (Pecten), Conoco and Phillips (now merged), and Amoco (now part of BP) spent more than US$150 million on onshore exploration in the 1980s and early 1990s, but no oil reserves were discovered. Still, Range Resources, a small Australian-based oil firm with close contacts to the government in Puntland, estimates that the region could hold 5 billion to 10 billion barrels of oil based on an analysis of the previous exploration reports.     

China remains to have a significant competitive advantage in the race to secure natural resources around the world. While Chinese firms do not have the technology to drill in some of the conditions that Western firms can, they also do not have the same political and financial constraints that prevent them from investing in regions considered off-limits to Western firms.

The investment in Somalia’s Puntland province still looks risky, even by Chinese standards. The deal appears to have been struck with the local officials in the province, which claims autonomy from the transitional central government. However, the president of the TFG (what does TFG stand for?), who is from the region, was involved in the deal. The prime minister of the TFG appears to prefer another model to attract investments, passing a national oil law that will clarify the legal questions that prevent Western firms from returning to Somalia. The Chinese deal may well fall victim to the political infighting that is likely to follow.

Beijing’s decision to work with the local representatives in Puntland may well prove to be enough, and China could soon be pumping Somali oil, if it even exists.

Source: Africaecon.org
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Source: www.asiaecon.org |


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