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Congo-Brazzaville oil find presents new challenges

By Théau Monnet
Posted on Wednesday, 21 August 2019 11:42

An oil well near Muanda, in the far west of Congo Republic © Gwenn Dubourthoumieu/JA

Two Congolese companies announced last week the discovery of an oil field in Oyo, Republic of Congo, estimated at 359 million barrels.

The discovery, if confirmed, will attract large groups and represent a challenge for the country.

The discovery of the onshore deposit in the Delta de la Cuvette, announced on Saturday, 10 August by two local oil companies, African Society for Petroleum Research and Distribution (SARPD-Oil) and Petroleum Exploration & Production Africa (PEPA), has created a stir, but for the moment there is little precise information available.

Francis Perrin, Senior Research Fellow at IRIS (Paris), specialist on energy issues, and associate researcher at the Moroccan think tank Policy Center for the New South, however, warned these figures should be treated with caution. He said the announcement might be a way to attract the attention of major oil companies to Congo to increase further exploration of its subsoil.

If proven correct, it would almost triple the daily oil production of the Republic of Congo (currently about 350,000 barrels per day).

And despite the government’s attempts at diversification, the country’s revenues still depend heavily on oil exports.

Congolese authorities indicated that the country’s production could reach 983,000 barrels per day, but SARPD-Oil and PEPA are only in the final phase of exploring the area. Are they justified in being so optimistic?

Francis Perrin: At this stage, we must remain cautious. There is not yet any detailed technical information, or information protocols depending on the progress of the work, to validate such figures. The ones announced in the media are absolutely huge; they assume that the discovery is phenomenal, which seems extremely questionable for a land-based field in the Republic of Congo.

What are the steps before the exploitation of these blocks in the Delta de la Cuvette?

We are in an exploration phase. When a discovery is made, companies drill appraisal wells around the discovery well to try to estimate the reserves. Then, when we know that the discovery will be profitable, we move on to the development phase, which consists of drilling for exploitation, installing platforms – this is the heaviest phase in terms of investment – which will take a few years. Then we will move on to production. The larger a deposit is, the longer it takes to exploit it.

Will the two Congolese companies SARPD-Oil and PEPA have the capacity to exploit such a deposit?

They are not well-known oil companies; they do not publish annual reports, do not have a website, and they are not supervised by commissions on their stock exchange transactions, for example. That is why it is necessary to be extremely careful about the information they communicate.

But if the figures given are true?

No, they will not have sufficient financial resources. Such a discovery requires several billions in investments and, therefore, the resources of major oil companies. That being said, it is possible that a small company, following a major discovery, may include large companies on its licence to finance very costly investments. And the announcement of important discoveries can attract the attention of major groups.

Which companies are now likely to enter the game?

We are obviously thinking of Perenco — Europe’s first independent oil and gas company — because it is a company that knows the Republic of Congo well, it is already there, has operating permits, and has been producing oil for several years.

There are also a few major international operators established in the country, such as the French Total and the Italian Eni. But it will be necessary to wait for the results of a call for tenders issued by the authorities before taking a decision.

In addition, in 2018, the Republic of Congo launched another call for tenders to propose oil and gas exploration permits, both onshore and offshore, for 18 new blocks, five of which concern the Delta de la Cuvette. The results are expected to be announced at the end of September 2019, which shows that the country is trying to stimulate investment in search of new deposits.

Faced with an oil discovery like this, what are the mistakes to avoid?

Communicating too quickly, based on insufficiently reliable data, can damage the image of oil companies and the country concerned.

It is also necessary to ensure the maximum integration of Congolese companies and workers, but this requires that human resources have the necessary level of skills. At the moment, foreign workers carry out most exploration and exploitation in this country. National skills development must be accelerated.

We also need to ensure that oil revenues actually benefit the country and the entire population. This is the whole issue surrounding oil rent management, an essential and sensitive issue, particularly for sub-Saharan African countries.

From an environmental point of view, it is a high-risk industry (fire, exposure, oil spills), which means the country must impose very strict standards and must provide for the means to ensure these standards are respected. Here too, an increase in competence is necessary, whether on land or at sea.

This article first appeared in Jeune Afrique.