* Somalia says oil exploration key to country's future
* U.N. investigators say oil contracts lack transparency
* Oil deals from two decades ago on hold due to war
By Drazen Jorgic and Louis Charbonneau
NAIROBI/UNITED NATIONS, Oct 24 (Reuters) - Somalia said itwas reviewing several oil and gas deals that U.N. investigatorssay lack transparency and risk hindering development of thecountry's energy industry.
Energy firms are cautiously eyeing Somalia's long coastline,an untapped frontier on the east African seaboard that hasbecome an exploration hot spot after big gas finds in Mozambiqueand Tanzania. Somalia's southern neighbour Kenya has found oil.
The Somalia-Eritrea Monitoring Group (SEMG), an eight-memberpanel of investigators that monitors compliance with U.N.sanctions, said Mogadishu had signed a series of contracts andcooperation agreements that "highlighted transparency andaccountability issues" in state petroleum institutions.
In a report, the monitors said such deals were "likely toexacerbate legal tensions and ownership disputes and stunt thetransparent development of Somalia's oil and gas sectors".
Mohamed Keynan, director of communication in the president'soffice, said Somalia was reviewing several contracts with thehelp of the Financial Governance Committee (FGC), comprisingthree Somali members and three donors, including representativesfrom the World Bank and International Monetary Fund.
"The Federal Government of Somalia (FGS) will takeappropriate action, based on the advice of the FGC," Keynan saidin a statement sent to Reuters. "However, it is wrong to assumethat all contracts in place with the FGS are in some wayflawed."
About a dozen companies, including oil and gas majors, hadlicenses to explore Somalia before 1991, the year a conflicterupted that tore the nation apart for the next two decades,involving clans and Islamist militants.
The breakaway territory of Somaliland, semi-autonomousPuntland and other regional authorities in the fractured nationhave granted their own licences for some of the same blocks.
Western diplomats have said the government's limitedcapacity and experience in negotiating often complex energy andother deals could mean Somalia received a poor return. Donorshave also been unnerved by earlier U.N. reports that cited casesof government corruption, charges Mogadishu denies.
EFFORTS APPRECIATED
In the latest report, U.N. monitors said a deal withLondon-based Soma Oil and Gas had "never been made public, norwas it approved by the Federal Parliament of Somalia".
Lawmakers have in the past challenged contracts that theysaid parliament had not been given the chance to scrutinise.
Soma Oil said "the broad terms" of the deal were made publicand said it had invested about $37 million on a programme togather and digitalise old seismic information and collect newoffshore data.
The firm, chaired by former senior British politicianMichael Howard, said it was not operating in disputed regionsbut was focusing on deep water areas offshore. It said its workhad encouraged other firms to discuss restarting activities.
"The efforts of companies such as Soma Oil and Gas are bothessential and greatly appreciated," said Keynan, adding Somaliawas recovering from war and could not do such work itself.
The monitors said the federal government was in talks withfirms such as Shell, Exxon Mobil Corp and BP, to revive contracts which were put under force majeurein 1991 when the civil war broke out.
They said "such negotiations are premature and could sparkconflict, especially since they have not been conducted inconsultation with regional authorities who may be affected".
Shell said it had no comment on such political issues, andBP denied it was in talks with Mogadishu on blocks where itdeclared force majeure in 1991. Exxon did not immediatelyrespond to requests for comment.
Petroleum Minister Daud Mohamed Omar said on Monday thatSomalia wanted oil output to start in six years. (Additional reporting by Edmund Blair in Nairobi; editing byEdith Honan and Emelia Sithole-Matarise)