Thursday, June 23, 2016

While the Democratic Republic of the Congo has long been known for its wide array of minerals and other natural resources, oil and gas have not been included in that long list. This is beginning to change and the DRC could join the growing club of major sub-Saharan oil producers, currently headed by Nigeria and Angola.

With most of Angola’s oil being extracted from the seabed of the Atlantic south and north (offshore the Angolan enclave of Cabinda) of the DRC’s short, 23-mile coastline, as well as neighbor Republic of Congo getting significant quantities of oil from its Atlantic seabed, it was long believed that the DRC should also have offshore oil.

And indeed it does have oil, but only small quantities have been found so far. Exploration started in the early 1960s, and continued into the 1970s and 1980s. Forty-one wells were sunk. Of these, eventually five produced oil and one produced gas.

Chevron found oil in 1973, and this oil has been pumped since 1976. Gas is not exploited. The current operator of these offshore-extraction activities is Anglo-French independent producer Perenco, which said in 2015 it produced 22,500 barrels per day from the DRC’s offshore wells.

“All the produced crude is stored on board the Kalamu floating terminal, which can store up to 1 million barrels of oil,” Perenco states on its website.

But as with the DRC’s west coast logic of finding oil and gas in an area of the ocean belonging to country A if it is surrounded by oil-and gas-producing wells in countries B and C, significant finds by Uganda, on its side of Lake Albert, have spurred the DRC to explore for hydrocarbons on its eastern frontier.

Three companies — London-based Tullow Oil Plc, Total SA of France, and China National Offshore Oil Corp. — have drilled over 100 wells on the Ugandan side of Lake Albert, and the Ugandan government has estimated its oil reserves at 6.5 billion barrels.

Uganda recently announced that it planned to begin production in 2018 and that it would build a $4 billion, 800-mile pipeline to the Tanzanian port of Tanga to export its crude. This will be the first oil pipeline in East Africa.

Some of the Ugandan crude will also be used to supply a 60,000 bpd refinery to be built at Hoima, not far from the lake.

On the DRC side of Lake Albert, exploration has also turned up positive results. In August 2014, Oil of DRCongo, a company controlled by Israeli billionaire Dan Gertler, announced that it had found some 3 billion barrels of oil at the lake.

To put the Oil of DRCongo find into perspective, the size of the reserves it discovered are equivalent to those in Britain and South Sudan. The company said exploitation of these resources could add 25 percent to the DRC’s gross domestic product.

In June 2015, the DRC Parliament in Kinshasa adopted a hydrocarbons code to help bring law and order to the industry, which has been largely unregulated in the DRC to date, fostering corruption.

In a more controversial development, in 2007 the Congolese ministry of hydrocarbons awarded two oil concessions that straddle the borders of DRC’s storied Virunga National Park, the first such park established in Africa and which is home to gorillas, other apes and a wide range of species, some of which are rare.

French major Total SA gave up its concession, but SOCO International, a British oil company, did seismic studies that confirmed the presence of oil reserves under the park. Widespread international opposition to developing wells in the area have prevented any movement so far, but Kinshasa has said it will consider granting exploitation rights if UNESCO indicates that this World Heritage Site will not be negatively impacted by the oil industry.

It is not clear how the DRC will get its oil to market, given the lack of any pipeline or of good roads or railway lines to carry such freight. And given DRC’s uneasy relations with Uganda, it is not likely that Kinshasa would want to depend on the Ugandan pipeline to Tanga, even if Kampala did offer that option.

Also, at the moment the DRC does not have a working refinery, having closed the only one in the country, SOCIR, in 1998. However, the new availability of locally produced oil might well spur construction of one, as it has in Uganda.

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