Issue 113 • 4 May 2007

It’s not easy going as DRC investors look to peace dividend, but IOCs could yet make progress

The defeat of Jean-Pierre Bemba has strengthened President Joseph Kabila’s position, but has done little to boost business confidence. Investors are looking to see how the government will handle the minerals contracts concluded under previous administrations, but at least hydrocarbons agreements seem less controversial than mining deals, writes François Misser.

Despite hopes that last year’s elections would finally bring some measure of peace to Democratic Republic of Congo, clashes in Kinshasa on 22-23 March between the army and opposition leader Jean-Pierre Bemba’s militia left 600 people dead, underlining the volatility that continues to mark all aspects of Congolese life.

Bemba had won 42% of the votes in October’s presidential election run-off, had accepted his defeat and was supposed to lead Congo’s opposition, but 500 of his armed guards refused to lay down their weapons and join the national army. Bemba, who had taken refuge in the South African embassy after the fighting, flew to Portugal on 10 April for medical treatment and is thought unlikely to return.

The fighting dealt a blow to hopes that investors could be persuaded to put their trust in President Joseph Kabila’s ability to keep the country together. Members of a visiting German trade mission fled across the Congo River to the relative safety of Brazzaville.

Now, with the new government in place and Kabila’s main rival out of the way, donors and foreign investors are watching closely to see whether the government will follow the recommendations of the International Monetary Fund to re-examine resources contracts concluded by previous governments. This is intended to ensure transparency and to establish whether the new government recognises agreements signed by previous administrations.

A range of contracts are under scrutiny. In March, new Scientific Research Minister Sylvanus Mushi Bonane criticised his predecessor’s decision to sign a memorandum of understanding giving the UK-based Brinkley Africa Ltd a monopoly over uranium exploration, production and export.

Prime Minister Antoine Gizenga wants to review partnerships between state mining companies and foreign corporations, and on 27 March Mines Minister Martin Kabwelulu ordered state companies not to conclude any new deals until the situation is clarified.

An opening for IOCs

Contracts in the hydrocarbons sector are far less controversial, although presidential approvals are moving slowly.

London-based Surestream Petroleum, whose two conventions for three onshore blocks were approved by a presidential decree in February 2006, is preparing to start drilling on its Yema, Matamba-Makanzi and Ndunda blocks in the Lower Congo Basin.

Other companies, such as the US’ EnerGulf Resources and London-based SOCO International have signed conventions for exploration and production-sharing agreements, and are still waiting for presidential decrees. EnerGulf signed an exploration and production concession for the Lotshi block in the onshore coastal basin in December 2005 (AE 97/2). SOCO took 85% in the onshore Nganzi block in July 2006 (AE 101/21).

Prosper Kanyangogote, director at the new Ministry of Hydrocarbons, told African Energy that further prospects would be offered by the Angola-DRC Joint Exploitation Zone.

However, the delineation of this potentially attractive area is still to be approved by both countries’ parliaments.

The previous government signed an MoU with Australia’s Caspian Oil and Gas and Oil Search of Papua New Guinea, giving access to geophysical data for the Central Basin (Cuvette Centrale). These Antipodean companies have been authorised to start seismic and aeromagnetic prospection and geochemical surveys. Caspian also has diamond licences in DRC, in joint venture with De Beers. Oil Search has been looking for new openings in Africa to build on its presence in Libya and Egypt.

There were more negotiations in late March between Tullow Oil, Heritage Oil and DRC parastatal Congolaise des Hydrocarbures (Cohydro) to conclude a production-sharing agreement signed in July 2006 for Blocks 1 and 2 on the shores of Lake Albert (AE 103/17).

Waiting on CDMs

The new government is addressing sensitive issues across a whole range of sectors, which also include forestry, where the World Bank and conservation organisations have asked the government to maintain its 2002 freeze on the distribution of new logging permits. The government agrees, but is hoping to win compensation.

In February, Environment Minister Didace Pembe Bokiaga suggested a deal to the international community where the government would maintain the moratorium in exchange for $1.5bn of compensation for lost logging revenue.

However, it is not clear exactly where the funding would come from; the Kyoto Protocol’s Clean Development Mechanism does not yet take account of “avoided deforestation”