Petroleo En El Congo

A Lake of Oil

Congo’s contracts escalate conflict, pollution and poverty
May 2010

A Lake of Oil

Congo’s contracts escalate conflict, pollution and poverty
Table of Contents
Executive Summary: Introduction Context: Oil in DRC Company Profiles Analysis of contracts 1. Agreement 2. Revenue and tax i) Bonuses ii) Royalty iii) Fiscal terms iv) Cost recovery v) Production Sharing vi) Stateparticipation 3. Economic Analysis – what are the deals worth? i) State revenues exaggerated? ii) Corporate profits excessive? iii) High oil prices: DRC losing out? iv) Risks dumped on DRC? v) Public revenues disappearing into private pockets? 4. Environmental protection 5. Gas flaring 6. Training and Jobs 7. Secrets 8. Freezing Congolese law 9. Undermining sovereignty 10. Human rights, conflictand security Conclusion: Will oil benefit DRC? Recommendations Appendix I – Production Sharing Agreements Appendix II – Input data Endnotes 4 5 6 8 8 9 9 10 10 11 12 13 14 15 16 18 19 20 21 24 25 26 28 29 30 33 35 36 37 38

Acknowledgements
The report was researched and written by Taimour Lay and Mika Minio-Paluello of PLATFORM. Comments, guidance and support were provided by Alfred Buju (Headof the Justice and Peace Commission/Caritas in Bunia), Henri Muhiya (Commission Episcopale pour les Ressources Naturelles in Kinshasa), Richard Mugisa, Catherine Clarke, Kevin Smith (PLATFORM), and the Africa Institute for Energy Governance. Design by Adam Ma’anit and Anna Grigoryeva.

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Cover photographs: UN peacekeeping force, Ituri. UN/Christophe Boulierac.www.unmultimedia.org/photo/. All other photographs: Taimour Lay

executive summary

Following a two-year impasse, oil exploration on the DRC side of Lake Albert is set to begin in 2010/11. This report aims to provide an in-depth analysis of the confidential – and now disputed - Production Sharing Agreements (PSAs) Kinshasa signed with two sets of companies in 2006 and 2008.
PLATFORM has investigated thesecret contract terms relating to economics, sovereignty, human rights and the environment. We examine relevant paragraphs in the Congolese context, and in comparison to the situation in Uganda, where exploration is ongoing and first production imminent. PLATFORM released Uganda’s PSAs in November 2009 to warn of flaws in the deals1; this report likewise explores the balance of rights andresponsibilities between the DRC government and the oil companies, and identifies the legal provisions that will directly contribute towards an ‘oil curse’ in eastern DRC. In particular, the report explains how much money the companies and Kinshasa will make over the 20 years of the contracts; the ways in which articles in the deal will affect local communities’ rights and benefits; how environmentalprotection has been ignored; and the risk oil extraction poses to human rights and security in the region. DRC is no stranger to oil extraction – though on a smaller scale. Perenco’s concession (see Appendix 1) in Bas-Congo already provides a textbook case of secrecy, lack of corporate accountability, environmental problems, negligible development outcomes, corruption and heavy-handed responses tolegitimate community protest2. While Bas-Congo has been producing around 30,000 barrels per day (bpd), DRC’s Lake Albert blocks could, based on discoveries on the Ugandan side, yield over two billion barrels of oil, with peak production over 150,000 bpd. That would generate revenue in the billions of dollars (see p26 ff ) and a scale of operation far beyond anything the state and communities in DRC havehad to deal with before. This level of invasive corporate activity will be happening in one of DRC’s poorest and least stable regions, whose communities are still recovering from the brutal 1998-2003 war, are heavily reliant on the United Nations presence to maintain peace, and where the authority of the central government and national army remains uncertain. The Production Sharing Agreements...