March 31, 2010 / 3:58 PM / 9 years ago

DRC aims to attract energy investment with oil code

KINSHASA (Reuters) - Democratic Republic of Congo hopes to make its oil sector more attractive to foreign energy firms by offering competitive contracts and speeding the process for awarding blocks, according to energy ministry recommendations seen by Reuters.

Oil workers walk through pipe installations on a tanker at Bonga off-shore oil field outside Lagos, October 30, 2007. REUTERS/Akintunde Akinleye

The proposals are part of a hydrocarbons code due to be voted during parliament’s current session, and come amid rising investor interest in the central African nation’s tough-to-reach crude reserves after big finds in neighbouring Uganda.

“These resources should be realised so that they really benefit the country and its people,” the ministry said in the recommendations. “To do this while ensuring the interest of the nation, the law that governs this sector should contain provisions to attract investors,” it said.

Congo’s tiny oil sector pumps about 25,000 barrels a day and development has been virtually paralyzed by decades of corruption and conflict.

But a clutch of investors are now lining up to start exploring zones like Lake Albert and Lake Tanganyika that could make the country, which has traditionally relied on mining for the bulk of its reserves, a much larger producer and pad debt-ridden state coffers.

The energy ministry’s proposals for the new oil code would allow producer companies to claim up to 60 percent of any eventual oil output after royalties to cover their costs, which are typically high during early field development.

That percentage would rise to 70 percent for reserves deemed difficult to reach, including those in very remote zones, in deep water, or swampy areas, according to the recommendations.

The state would then take no less than 40 percent of the remaining output, dubbed “profit oil”, according to the recommendations.

SPEED

Industry observers said the shares proposed for covering costs and for remaining profit-oil are better than in most other oil states. In Libya, for example, some production sharing contracts grant the state more than 90 percent.

Congolese government officials declined comment on the oil code, which should replace existing laws for oil and gas currently contained in Congo’s mining code.

The draft, which has already been adopted by Congo’s Senate and is now with the National Assembly, also recommends changes aimed at speeding up drawn-out processes for awarding and ratifying exploration and production blocks.

Some companies have been waiting three years for presidential approval for uncontested blocks, while other companies — such as Tullow and Divine Inspiration Group — have competing claims on the same blocks.

One proposal would require the president to approve or reject any oil agreements within 45 days. Companies would also be under pressure to start “active field development” within 18 months of gaining a production licence, instead of three years.

The recommendations also stipulate that if the ministry fails to answer requests within three months, companies can assume the answer is positive.

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