The recent discovery of oil deposits in the self-declared autonomous region of Puntland, northeastern Somalia, could improve its population’s livelihoods as long as it is handled properly, officials and locals told IRIN.

"The discovery of a valuable natural resource anywhere in Somalia is welcome and it should benefit all the people of Somalia. The finding of adequate oil in Puntland would change the lives of the people of Somalia for the better provided it was managed properly and Somali authorities learned from the experiences of other African countries where oil was found. Oil has the potential of bringing corruption and curses to a country if not handled well," said Mohamed Abshir Waldo, an independent analyst and Somalia expert.

Farah Ali Jama, Puntland Minister of Finance, said he was confident that any money from the oil would be handled properly and improve the lives of all Somalis. "I am 100 percent confident that this resource will improve people’s livelihoods," he said, adding, "we will not fall into the mistakes made by others."

Jama said any funds from the oil find, which is expected to come on-stream soon, "will not fall into the pockets of any individual or group. This is for all of the Somali people wherever they may be."

However, there is as yet no legal framework in place for who will collect the money. "We are working on a legal framework for the relationship between the TFG [Transitional Federal Government] and the Puntland government on who will do what," said the minister.

He said the draft constitution, which is expected to be completed before August 2012, "will make it clear how resources will be divided”. Until then, "we [Puntland] will make sure that whatever money comes out of this will be handled transparently and every penny accounted for".

Great expectations

Farah Hassan Atosh, a traditional elder and resident of Armo town, 28km northwest of the oil field, said: "We are expecting great things. It will change our lives for the better. Insh’Allah [God willing] we will never depend on others to give us food again."

He said that change was already happening in Armo town (population 25,000). "You can see many more people arriving every day and it can only add to the development of the town."

Drilling began in January 2012, and locals support the project, he said. "We not only support it, we will defend it from anyone who wants to stop it."

He said the project was also contributing to peace-building in the area. "They are employing many young men who would have been idle and easy prey for recruitment into militias."

Benefits

Awad Husein Ali, the former district commissioner of Armo, told IRIN that residents were already feeling some of the benefits. "Businesses are starting in the area. We have a construction boom going, with hotels and big houses being built to accommodate the [oil] company employees and contractors."

Ali said that even the Somali shilling had started to appreciate against the dollar. "A few months ago we were exchanging US$1 for 32,000 Somali shillings. Today it is 23,000 Somali shillings. Who knows, our shilling may become like the Kuwaiti Dinar!"

New infrastructure projects are expected to follow the oil, he said. "They are already putting in roads and hopefully, schools and hospitals will follow soon."

Reality check

However, a regional analyst, who requested anonymity, told IRIN that although the Puntland administration had so far said all the right things, "it does not mean that all will be well when the money starts flowing".

He also questioned if Somalis had the expertise to deal with an international oil company. "It is not even clear how much the Somalis will get and how much the oil company will get. There needs to be transparency on how much money the company will get. Is it 50 percent, 20 percent or more?"

He warned that, given the TFG’s poor record on handling finances, there had to be "a way to monitor how any money collected is spent. There should be a stringent legal framework in place to make sure that the money goes to the people of Somalia and not to individuals’ pockets."

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This article first appeared on March 8, 2012 on IRIN (the humanitarian news and analysis service of the UN-OCHA), with the title ‘Somalia: Benefits – and risks – of Puntland oil  ’. Items from IRIN are published in this blog with a written permission. Yet, this doesn’t necessarily indicate an endorsement of the claims therein.

Check the Somalia archive or the Energy archive for related posts.