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Chinese deal for Somalia oil
CNOOC’s willingness to strike an oil deal with the fragile government of Somalia, which has been a failed state for more than a decade, has provided stark evidence of China’s willingness to brave terrain that western oil majors deem too treacherous. The state-owned Chinese oil giant has signed a production-sharing deal with the transitional federal government in the east African country, which ranks as a high-risk frontier even in an industry well accustomed to dangerous environments.
Thereby making all members of the transitional federal government, their families, friends and cronies, wealthy.
In doing so, CNOOC and its smaller partner, China International Oil and Gas, are gambling on three points. First, that the interim government has the authority to make such deals and will stay in power. Second, that violence stemming from perennial inter-clan conflicts and more recently Islamist extremism will not derail its work. Third – and most fundamentally – that the country has some oil worth extracting.

Several western oil majors held exploration concessions in Somalia in the 1980s, but fled in 1991 when the overthrow of dictator Siad Barre ushered in 16 years of chaos.

Ali Mohamed Gedi, Somalia’s interim prime minister, told the Financial Times last week that ConocoPhillips, Chevron, BP, Royal Dutch Shell and Eni would be invited to return and change their concessions into production-sharing agreements under a new oil law due to be published in the next two months.

But that looks like a distant prospect. BP, Shell and Eni say they still consider the concession deals to be subject to force majeure – code for unexpected and disruptive events that prevent contractual obligations from being met. Chevron and ConocoPhillips have declined to comment.
Posted by: lotp 2007-07-23
http://www.rantburg.com/poparticle.php?ID=194223