Open letter to His Excellency Mr. Dahir Riyale Kahin, President of Somaliland regarding PSA between the government of Somaliland and unknown Company called REC for exclusive right to conduct petroleum operations in Somaliland

HE. Dahir Riyale Kahin
President of Somaliland

Friday 29th July 2005

Dear Mr. President,

We are a group of experts in the field of petroleum exploration with no political aspirations. As compatriots of this country we feel compelled to warn the government and the people of this country, the dangers that the country may face if they neglect and destroy the natural resources that are present in the country.

We believe that hydrocarbon is Somaliland’s most important asset. Handled correctly, it will be the basis of the country’s future development. However, our main concern here is the destruction and exploitation of the country’s hydrocarbon resources by its own elected authorities with the help of professional bandits.

As you are aware, your government has secretly signed a Production Sharing Agreement (PSA) with an obscure UK-based company called Rova Energy Corporation Limited (REC) in April, 27, 2003 for the sole and exclusive right to conduct Petroleum Operations including exploration, appraisal, development and production in blocks 35, 36, M10 and M10A (East of Berbera to East of Laasqoray, offshore and onshore). These blocks are located in the heart of petroliferous province and were operated by Amoco and its partners before they declared force majeure in 1989. Furthermore, your government has recently (July, 2005) permitted REC to commence the Second Exploration Phase, although the Initial Exploration Phase has expired in April 26, 2004, while REC did not fulfil its obligation under the Agreement.

We remind your government that there should be a high level of competency and transparency in all agreements that the government has entered into, including how the resources from these investments will be used for the interests of the people.

After examining the Agreement and a report prepared by REC, we believe that this Agreement is illegitimate, and it should be terminated immediately. The reasons for pronouncing this are listed below:

1.      Rova Energy Corporation (REC) Limited

The registered office of REC is Falcon House, 257 Burlington Road, New Malden, Surrey, KT3 4NE, UK. The Company’s registration Number is 03861142. REC changed its name on April 10, 2003 from Rova Energy Limited. It claims that the nature of its business is services to oil and gas extraction.

There are only four officers in the company with directors being   Ananda Kumar CHAKRABARTI and Jawahir CHAKRABARTI and the secretary as Amina CHAKRABARTI. All three of them are residing at the same address. The fourth individual is Vincent Dato LEONG, a Malaysian who is living in Kuala Lumpur.

The company has only issued 100 shares worth £1 each. Therefore, the total nominal value of issued shares is only £100. The shareholders are Dr. Jawahir ALI who held 16 shares, Dr. Jawahir Mohamed ALI who held 1 share, Mr. Ananda Kumar CHAKRABARTI who held 17 shares, Mr. Anandar Kumar CHAKRABARTI who held 1 share, and Westmont Offshore HK Ltd who held 65 shares. The first four shareholders are residing at the same address of that of the directors of the company. It is, therefore, obvious that they are the same two individuals who are using different names to deceive the authorities.

From the attached documents and the above account it is clear that this company was established to trick the government of Somaliland with the intention to filch the hydrocarbon resources of the country. As seen from the Annual Return, this company has no means to conduct petroleum operations in the country. It is a broker, trying to take advantage from the lack of law and order in the country, and it is not a genuine company.

Furthermore, this company has no track record of exploration and production of hydrocarbon in anywhere else in the world. Moreover, it has no qualified Petroleum Geologists, Geophysicists and Petroleum Engineers who can assist the hydrocarbon potential in the Contract Area. As a result your government should have not appointed this bogus company to be the Contractor for the Petroleum Operations in the Contract Area.

2.      Production Sharing Agreement (PSA)

There are a lot of flaws in the Agreement which your government have signed with REC. Some of these are listed below:

  1. Mining/Hydrocarbon Act

Somaliland has no approved Mining/Hydrocarbon Act. Therefore, we believe that the PSA should have not been signed without the existence of Mining Act in the country. The priority should have been to establish the Mining Act, so that the future PSA and Exploration Licenses should be according to the Mining Act of the country.

  1. Concession Holders

For the interest of Somaliland, we believe it is better to renegotiate with the concession holders (i.e. BP and its partners), instead of signing a new agreement with a bogus company. Furthermore, it is questionable whether this Agreement is legal since the concession holders declared force majeure in 1989 due to the civil war in the country.

  1. Exploration Phase

Under the Agreement the Contractor is not obliged to carry out rigorous exploration activities for the purpose of exploring the oil and gas potential within the Contract Area. The Contractor is not required to acquire geological and geophysical data, for example it is not obligatory for the Contractor to:

  1. Shoot, process and interpret two dimensional or three dimensional seismic lines. It is a common practice with this type of agreements to demand the Contractors to acquire minimum area coverage (e.g. 300 sq. km) of 3D seismic.

  1. Carry out an upper section site investigation survey in the Contract Area to ensure a safe and environmentally sound base for drilling.

  1. Drill exploration wells in the Contract Area during the Initial Exploration Phase. This phase should include the drilling of two to six exploratory wells.

  1. Acreage Fees

Under the agreement, the Contractor is not obliged to pay annual acreage fees in the Contract Area. It is a common practice in the industry for the Contractors to pay an annual acreage fee of up to one thousand ($1,000) dollars per square kilometre of the Contract Area during the Exploration Period. Knowing that the concession area of blocks 35 and M10A is 16,272 square kilometres, it is apparent that the country is losing a huge amount of needed income.

  1. Employment and Training Opportunity

The Agreement does not include providing training opportunities to the Ministry’s professionals, and employment preferences for the citizens of Somaliland. It also does not include a community benefits component 

3. Contractor has not fulfilled its Obligation under the PSA

Obligations under the Agreement include:

“5.2 (a) (i) During the Initial Exploration Period, the Contractor shall conduct the following exploration work programme:

A. Review, reprocess and reinterpret existing seismic data;

B. Define drilling location(s) and logistical programmes for one or more wells.

The Minimum Expenditure for this period shall be Five hundred thousand US dollars (US$ 500,000).”

The Initial Exploration Period was 12 months from the date of the contract. It is clear (as documented below) that the Contractor has not fulfilled its obligation in the Contract Area under Article 5.2 (a) (i). Therefore, the Agreement should have expired in April 26, 2004 after the end of the Initial Exploration Period.

a.      Failure to Review Existing Data

Under the Agreement, the Contractor is required to review existing geophysical and geological data. However, the only report that the Contractor submitted to the Ministry of Water and Mineral Resources was not an original report. The Contractor has copied the report from existing reports and publications. It is clear by examining the report that the Contractor has cut and pasted without adding new data or interpretation, and at the same time claiming to be its own work. This is a crime that deserves a punishment.

In addition, the report does not contain enough detailed information that can be used to plan drilling locations for exploratory wells.

b.      Failure to Reprocess and Reinterpret Existing Seismic Data

There is no evidence at all to show that the Contractor has either reprocessed or reinterpreted the existing seismic data. Once more the Contactor has copied a few sections of 2D seismic profiles from existing company reports to allude that it reinterpreted these lines. Moreover, in the report there is no evidence to indicate that the Contractor understands the Petroleum System of the Contract Area.

c.       Failure to Define Well Location

In the report, the Contractor has not mentioned the location of exploratory wells as demanded by the Agreement. This is not surprise because the Contractor:

·        Never visited the Contract Area
·        Has no knowledge of the Petroleum System of the Contract Area
·        Has not reprocessed and reinterpreted the existing data
·        Has not acquired new seismic data that can be used to define the location of exploratory wells
It is, therefore, foolish to suggest that the Contractor can define the location of exploration wells without the help of 2D and 3D seismic data. 2D seismic data has been very effective in mapping traps for hydrocarbon accumulations. 3D seismic surveys are now being implemented, and have proved very successful in the exploration for oil in small fields.
·        Has not interpreted exploration models that forms the basis for a decision about potential exploration drilling
·        Has not planned logistical programmes for drilling exploratory wells

d.      Failure to Meet Expenditure Commitment

Under the Agreement, the Contractor should have expended no less that US$ 500,000 during the Initial Exploration Period. However, there is no record to show that the Contractor has spent this amount for the purpose of exploring the oil and gas potential within the Contract Area. It should be noted that the Contractor never visited the Contract Area. The only activity that it claims to have carried out is the report that it copied from the existing publications.

4.      Recommendations

On the basis of the above account, it is apparent that:

  1. Rova Energy Corporation Limited is a fake company that has no income to conduct exploration activities in the Contract Area. It is trying to take advantage of the situation of the country, to exploit the hydrocarbon resources of the country.

  1. There are a lot of imperfections in the Agreement including the lack of Mining Act, the absence of rigorous exploration activities and the lack of annual acreage fees.

  1. The Contactor (REC) has breached its obligations in the Contract Area under Article 5.2. (a) (i).

i.                     It failed to complete the activities listed in Article 5.2. (a) (i).

ii.                   The Initial Exploration Period has expired in April 26, 2004

  1. The Contractor did not carry out the Petroleum Operations in the Contract Area diligently; with due regard to good oil field practices.

  1. This bogus Contractor is blocking well known oil and gas companies that have skills and capital to invest and explore the country.

  1. To be in an agreement with this phoney company is a disgrace to our nation. It highlights your government’s view with regards to international exploration licence awarding processes and how to safeguard the country’s natural resources.

Therefore, we urge the President to:

  • Unilaterally terminate this Agreement immediately.

  • To stop this fake Contractor to have further rights to conduct Petroleum Operations or recover any Petroleum Costs in the Contract Area.

  • To investigate the corrupt government officials who authorised this Agreement, and bring them to justice.

Finally, whatever the motives and the intentions behind this scandal are, we believe that it is within your government’s duties to protect the country’s natural resources.

We hope the will of the sincere citizens like us, shall have more thought with your Excellency.

We look forward to hearing from you.

Yours Sincerely,

Mohammed Yusuf Ali, BSc, MSc, PGCE, FGS, Ph.D.

Professor Ali teaches and researches in petroleum geophysics at The Petroleum Institute, Abu Dhabi, UAE. He can be reached at E-mail:

Ahmed Ali, BEng (hons), MSc, Ph.D, DIC

Dr. Ali is a Petroleum Engineer currently working at Kings College London, University of London. He can be reached at E-mail:

Cc: Hon. Qasim Sheik Yusuf, The Minister of Water and Mineral Resources


Register information[1] of Rova Energy Corporation Ltd

1.      Current Appointments Report

2.      363s Annual Return

3.      DCA

[1] These documents are obtained from Companies House, which stores company information delivered under the Companies Act.