Imminent oil bonanza should finally wake up ‘sleeping giant’ DR Congo

They say that the Democratic Republic of Congo (DRC) is the sleeping giant of Africa. Giant because of its immense geography and also its huge quantities and varieties of natural resources as yet not fully explored or exploited.

A company called Oil of DR Congo recently announced that seismic surveys have confirmed presence of about three billion barrels of oil reserves on the western side of Lake Albert, a Rift Valley lake that is shared with Uganda.

However, the oil reserves figures announced should be viewed with caution since technically only after sinking exploratory wells can quantities be correctly estimated.

Information available reveals that the man behind Oil of DR Congo is Dan Gertler, a dual Israeli and DRC citizen who is already involved in extensive mining activities in the DRC.

The explorer owns two of the only three oil blocks on the western side of Lake Albert, and is on the ground working on basic access infrastructure and community facilities.

Although DRC produces about 25,000 bpd on the Atlantic side of the country, when Lake Albert finds are confirmed DRC may become a significant player in oil and gas, joining other emergent regional players (Tanzania, Uganda and Kenya).

The ongoing successful drilling by Uganda on the eastern side of Lake Albert has confirmed presence of about 3.5 billion barrels of oil in place, and in so doing Uganda has significantly de-risked most of the areas around the lake, including the DRC side.

It is, therefore, not out of tune to expect a replica of success on the DRC western side of Lake Albert due to shared geology, basins and reservoirs.

Uganda is entering the oil production development phase (with an estimated flow of about 200,000 barrels per day), and with firm plans for an export pipeline through Kenya and a 60,000 barrels per day refinery in the vicinity of the oilfields.

Ability by DRC to successfully undertake the hydrocarbons exploitation will depend on a number of factors, key among them the sustainability of peace and security in the Eastern DRC. Anywhere in the world, insecurity and investments are mutually exclusive.

It can only be hoped that the ongoing calm and peace in Eastern DRC will persist because foreign capital participation will certainly depend on sustainable security assurances.

Secondly, the very location of the DRC oil finds implies that to explore, develop and commercialise the oil finds, regional co-operation and protocols shall be essential.

Specifically, DRC and Uganda may potentially find themselves sharing the same oil reservoirs across Lake Albert which is an ecologically and environmentally very sensitive area, and which calls for the highest operating standards and safeguards. A joint DRC/Uganda environmental plan would normally be expected when drilling on the common lake starts.

Across the world, there are examples and templates on how cross-border hydrocarbon resources can be exploited between neighbouring countries. However, this requires a strong spirit of mutual understanding between the neighbours.

Thirdly, significant oil development shall require huge capital inflows. To attract such investments DRC shall need to have in place effective oil and gas legal and regulatory framework that sufficiently guides and protects investments. The country would also need to significantly upgrade governance to ensure that perceived country risks are minimised.

Oil of DR Congo is not in the widely known league of international and gas companies and may eventually need to farm out their blocks to larger international oil and gas corporate entities with larger capital and technical capacity.

DRC will need to define an export route for their crude oil, which can be exported via either the Atlantic or Indian Ocean.

If they opt for the Atlantic route and terminate at the River Congo Estuary, then this is all internal DRC transit. If they chose the Indian Ocean route then they have to seek transit co-operation with Uganda and Kenya. The Indian Ocean route has certain pluses that would make it the preferred option.

Uganda and Kenya are already zeroing in on an export pipeline from Lake Albert to Lamu port in Kenya. It may not be too late to join the Uganda/Kenya bandwagon, if DRC can negotiate the necessary protocols without unduly delaying the planned pipeline, which is currently due for feasibility studies.

Additional volumes from DRC would increase pipeline turnover and probably enhance pipeline economics. But it all begins with political protocols being in place.

Whichever direction the DRC oil flows, it is more than certain that the Ugandan and Kenyan logistics and engineering companies stand to benefit by providing services and human resource capacity to Eastern DRC oilfields.

This may already be happening as Mombasa port is the obvious entry point for oilfield materials and equipment for Eastern DRC which is currently active with exploration.

How this new oil benefits DRC and its people will depend on the quality of resource governance that DRC decides to put in place.

Unless major reforms are undertaken, it is difficult to believe that the current DRC “business as usual” resource practices will immediately awaken the sleeping giant when new oil dollars start flowing in.

Mr Wachira is the director, Petroleum Focus Consultants. E-mail: [email protected].