An industry rebirth?

For over half a century the DRC has been involved in the oil industry, though on a very small scale. In the 1950’s exploration started and a decade later discoveries were made along the 60km-long west coast positioned between Angola. 1969 saw the signing of a 30 year contract for production with Chevron, with outputs materialising in 1975. However, despite initial optimism, in the past 3 decades, the DRC has produced a mere 350 million barrels of oil – the present equivalent of 11 days of production in Saudi Arabia. Amounting to just 25,000 barrels per year (10,000 offshore and 15,000 onshore), the DRC remains a minor producer even in Central Africa. This is in stark contrast to neighbouring countries such as Angola (1.9 million barrels/day), the Republic of Congo (260,000), Guinea Bissau (380,000) and Gabon (295,000).

All-in-all, the DRC’s oil production has performed poorly – something which can in part be attributed to the total control of the sector under the company Perenco. However, the status quo looks set to change, with new exploration points arising, and the government stating its intention to increase production on the west coast. On shore, the government also hopes that oilfields which have been in production since the 1970’s have in fact been underexploited.

And the winners are...

Factors such as these have led to the recent allocation of several blocks to companies willing to re-initiate exploration activities in the region. Three blocks were allocated to EnergulfAfrica, Soco RDC was granted the licence to the Nganzi block and one has gone to Surestream Petroleum. What is more promising is the offshore resources. There is already offshore production along the Congolese coast but the oil of the "common interest area" between the DRC and Angola is located in deep waters and is still untapped. Dialogue around this issue began in 2007 between the two governments during an official visit by President Kabila in Luanda. It was then decided to find a "win-win agreement" to start the offshore oil production far from the coast. Since then the discussions have been on-going with the Angolan minister for oil visiting his counterpart in Kinshasa last July. Given the fact that Angola is now the premier oil producer in Africa and has a long history of offshore production, the Congolese government is certainly not in the best position to negotiate this "win-win agreement".

The significance of the new contracts signed with EnergulfAfrica, Surestream Petroleum and Soco RDC are two-fold - first off, they indicate the end of the Perenco monopoly and, secondly, they mark the beginning of a new relationship between the State and the companies. While the Perenco contract is based on royalties, the new contracts all stipulate that the production will be shared between the companies and the Congolese State, through the public company Cohydro.

Meanwhile, given the price rise in the oil market, there is a growing interest in the search for oil in the minerals rich Congo. In this vein, the market of exploration is booming in the central and eastern parts of the country. In the central part of the DRC, the exploration rights have been contracted to the Brazilian company HRT Petroleum. This company is supposed to gather geological data, to divide the region into blocks and to assess the potential in order to make possible the launch of an international tender process when the reserve will be proven with accuracy. In exchange, the Brazilian company has agreed to build the new Department of Oil and Gas as well as a laboratory in Kinshasa. The Brazilian company's estimates of the oil reserve are close to 4 billion barrels.

The Albertine graben bordering Uganda has been divided into five blocks for exploration and the Minister of Oil and Gas, Albert Mende, has allocated two blocks to the consortium Heritage/Tullow Oil. Three of them are still supposed to be allocated while the exploration rights have not yet been attributed in the Tanganyika graben bordering Tanzania and Burundi. Unlike the Congolese west coast, this is just the starting phase of the exploration in Eastern Congo. As in many instances though, this is proving to be problematic in light of the border dispute between Uganda and the DRC surrounding Lake Albert (this led to clashes between the Congolese and Ugandan armies and the death of a foreign engineer working for Heritage last year).

Challenges remain

Despite these positive moves, a number of challenges are still in place. Caused by the growing oil interest in the DRC, the government is trying to rewrite the legal framework. In August 2008, a seminar was organised in Kinshasa to assist in drafting a new oil and gas code to replace the outdated 1981 legal framework.

There have also been a number of controversies around the oil and gas department in recent months. Perenco for instance has come under heavy scrutiny after its Managing Director recorded a payment of US$ 300 million to the State this past financial year, despite a budgetary reflection of only US$ 200 million. Furthermore, Perenco has been criticised by both the country’s MPs and local NGOs regarding both unfair profit sharing and pollution levels. With regards to the Government, Minister Mende cancelled the exploration contract of Heritage/Tullow Oil and re-allocated it to a South African company, Divine Inspiration with very little explanation. Rumours of bribery are now rife concerning this May 2008 Ministerial decision and as a result, the Minister's policy was questioned in the National Assembly in July. The DRC’s MP’s have now voted to review all exploration contracts signed by the Minister (the HRT Petroleum, Heritage/Tullow Oil and Divine Inspiration's contracts) and to launch an inquiry into the administrative and financial management of the oil and gas department.