Oil Company Sees Congo Output Accord After Tribunal Ruling

  • Company has right to enforce deal for Lake Tanganyika blocks
  • Government must award contract within six months of ruling

La Generale Petroliere du Congo, a family-owned exploration company, said it expects the Democratic Republic of Congo’s government to sign an oil production-sharing contract after a tribunal upheld its rights to blocks covering the length of Lake Tanganyika.

The Oil Ministry is establishing a commission with the prime minister’s office, the justice and budget ministries and representatives from the company, known as Gepeco, to implement the January judgment by a tribunal at the Paris-based International Court of Arbitration, Managing Director Augustin Kikukama, whose family owns the company, said in an interview. The decision, which was provided to Bloomberg by Kikukama, hasn’t been released publicly.

The ruling gives Gepeco the right to negotiate a production-sharing contract for all 11 blocks in Congo’s portion of the 32,900 square-kilometer (12,700 square-mile) lake that lies on the border with Tanzania, he said. The area is unexplored, but puts Gepeco, a company with no previous oil and gas experience, in a powerful position to control future oil activity on the lake.

“We were the first to attract the government’s attention to Tanganyika so we deserve the application of our memorandum of understanding,” Kikukama said March 23 in the capital, Kinshasa. Jean Py, a spokesman for the prime minister’s office, declined to comment and referred all questions relating to Gepeco and the arbitration ruling to the Oil Ministry.

‘Baseless’ Termination

Gepeco signed a 12-month memorandum of understanding with Congo on Oct. 12, 2011, to evaluate existing technical data relating to the Lake Tanganyika oil concession and then negotiate and sign a production sharing agreement. The government terminated the agreement in April 2012, before Gepeco challenged the decision at arbitration in November 2013.

The termination was “at fault, ineffective and baseless,” the tribunal said in the decision. Gepeco and Congo must “resume the performance of the memorandum of understanding and negotiate and sign the production sharing contract” within six months, the tribunal said in the Jan. 12 interim award signed by the president of the arbitration committee, Christine Lecuyer-Thieffry, and two co-arbitrators. Gepeco would also be entitled to damages, dependent on Congo’s willingness to first apply the ruling in the specified timeframe, the tribunal said.

Congo’s government divided its portion of Lake Tanganyika into 11 oil blocks through a ministerial order on Oct. 27, 2011, two weeks after it signed the contract with Gepeco. The government’s decision to create the blocks was driven by Gepeco’s interest in the area, Kikukama said.

Onshore Licenses

Congo currently produces about 25,000 barrels per day from aging offshore oil blocks in the Atlantic Ocean. The government had planned to boost production by issuing new onshore licenses in the center and east of the country and passing a new oil law in 2015, but progress has been slow. Congo may hold as much as 6 percent of Africa’s oil reserves and has “significant development potential,” according to a 2013 briefing note by Norton Rose Fulbright.

Total SA, SacOil Holdings Ltd. and Israeli billionaire Dan Gertler’s Fleurette Group have oil-exploration projects in the country, though negotiations in the past 10 years with oil companies including Tullow Oil Plc, Petroleo Brasileiro SA and Chevron Corp. have collapsed. In 2013, then-Oil Minister Crispin Atama said the government would tender all blocks in Lake Tanganyika, but the auction never materialized.

Of the four countries bordering the lake, only Tanzania has issued oil licenses -- to Glenside, Australia-based Beach Energy Ltd. in 2008 and to Total in 2011. Australian oil producer Woodside Energy Ltd. acquired a 70 percent interest in Beach Energy’s Tanganyika block in 2014, before withdrawing 10 months later. The northern block, formerly held by Total, is now controlled by United Arab Emirates-based RAK Gas LLC following a new licensing round in 2014.

The International Court of Arbitration said cases are confidential and declined to comment, when contacted by email. The deputy chief of staff at Congo’s Oil Ministry referred questions to the chief of staff, who did not answer calls or respond to a text message seeking comment.

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