Tag Archives: congo

PLATFORM reveals Congo oil contracts that threaten resource wars and $10 billion rip-off

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Tullow & British Embassy push disputed deal that could cut Congo’s revenues by $10 billion

Confidential oil contracts held by UK companies Tullow and Heritage in the Democratic Republic of Congo were leaked today, revealing the danger of economic rip-off and rights abuses in one of Africa’s most unstable countries.

The Production Sharing Agreements (PSAs) are accompanied by a legal analysis, ”A Lake of Oil – Congo’s controversial contracts compromise rights, environment & safety”, published in English and French by PLATFORM in partnership with the African Institute for Energy Governance (Afiego).

As the dispute between Tullow/Heritage and the South African-led Divine Inspiration consortium over lucrative oil licences on Lake Albert comes to a head [2], the contract terms have been released for the first time. [3] PLATFORM’s analysis compares revenues delivered by two competing contracts, revealing that:

* Both Tullow/Heritage & Divine/H Oil’s contracts guarantee excessive profits, at the expense of Congo’s poor
* Tullow’s contract terms reduce the Congolese take by around 15%, compared to Divine’s.
* If recognised, Tullow’s contract will cut Congolese government revenues by over $10 billion – a figure equivalent to the country’s entire national debt. Tullow and the British Embassy in Kinshasa have been lobbying hard for these contract terms. This represents a significant transfer of wealth from some of Africa’s poorest to British and Irish investors.

In ”A Lake of Oil”, PLATFORM also raises concerns about:

* Co-operation between oil companies and military groups and the likelihood of escalating resource-driven war in eastern Congo.
* The legal rights granted to flare natural gas
* The complete absence of penalties for environmental damage
* The ‘stabilisation clause’, which will restrict DRC’s ability to improve its environmental protection and human rights standards in the future

Alfred Buju, head of the Justice and Peace Commission in Ituri, DRC, at the heart of Exploration Block 2, said: “This report reveals the contracts that will affect our communities and raises serious concerns about who will benefit from oil extraction in Ituri. We need the government and international companies to be honest and clear – will our environment be protected? The history of natural resources in eastern DRC makes us worry that oil will lead to more conflict.”

PLATFORM Campaigner Mika Minio-Paluello said, ”The reality is that extracting Congolese crude will escalate resource wars, transfer wealth from Congo’s poorest to London’s richest, create new health problems for local communities, increase corruption and pollute the land, water and air. It is up to social movements and civil society to create the pressure to defend rights, livelihoods and Congo’s rich environment.”

PLATFORM Researcher Taimour Lay in Bunia, Congo DRC, said “The confidential documents we have published make clear that the British government and oil companies have been lobbying for terms which leave Congo significantly worse off than another contract already on the table. This shows a wanton prioritisation of profit and British control of African resources over all else.”

Taimour Lay added, “Tullow’s statements demonstrate strength in corporate responsibility rhetoric. Yet their practice here on Lake Albert tells a different story – one of arrogance, environmental damage, collusion in secrecy and indifference to human rights abuses.”

Oil companies provide equipment to military in Congo

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Another investigation by Taimour Lay shows the risks of Tullow & Heritage’s oil finds on Lake Albert fueling new fighting between armed forces (armies and militias) in the region.

“Heritage Oil, owned by former mercenary fighter Tony Buckingham, had donated speed boats to the FARDC (Congolese national army) in March 2007 and had also been responsible for the delivery of 30 Land Rover jeeps to Bunia, which were then distributed to local commanders across the region.”

Bunia has been the scene of repeated clashes between government forces and militias since then, causing tens of thousands of people to flee.


Rukwanzi Island, on the international border, was the scene of Uganda-DRC clashes in 2007. (c) Taimour Lay

SPECIAL REPORT: Fresh fears of fighting on Lake Albert’s oil shores

In a packed wooden hut on the docks of Rukwanzi, a cacophony of Swahili, Lingala and French fills the air. Islanders’ hands shoot up to demand answers. Will the companies make us leave? Is Uganda already taking the oil? How will a joint production area work? What will happen to the fishermen if there’s a spill? Taimour Lay visited Ituri, eastern DRC and Rukwanzi and tells the story.

The 3,000 people here, eking out a living from the dwindling fish stocks of Lake Albert, find themselves at the centre of an area believed to contain up to 2 billion barrels of oil. They also live on the volatile, disputed border between two neighbours only just beginning to re-establish diplomatic ties after decades of conflict.

Eastwards across the water, you glimpse Uganda. To the west, the shore of war-torn Ituri, eastern DR Congo. Oil will either force the countries together as partners, or create tensions that lead to a future war – no one on the ground is willing to say which is more likely.

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PLATFORM leaks Uganda’s oil contracts – not such a rosy deal after all

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Held secret by the Ugandan government and oil companies Tullow Oil and Heritage Oil, PLATFORM today is revealing the terms of the contracts for oil operations by Lake Albert on the Uganda-Congo border, and their economic implications.

For the first time, one of Uganda’s Production Sharing Agreements is available to the public to read, after a leaked copy was placed online. PLATFORM’s analysis of the contract reveals that the repeated claims by the Ugandan government and the oil companies that Uganda has received a very good deal and the best in the region are not only a fiction, but were reliant on the real terms of the contracts being kept secret. While the contracts will deliver vast profits to Tullow Oil and Heritage Oil, the contracts will prevent the Ugandan people from receiving their due benefits. The terms of the contracts and the lack of openness are placing Uganda on a track set for the “resource curse”.

Download:

“A Bad Deal Made Worse – How the PSAs are ripping off Uganda” - PLATFORM’s preliminary economic assessment of the contract

(A full qualitative and quantitative analysis will follow at a later date)

Leaked copy of Heritage’s Production Sharing Agreement for Block 3A signed in 2004: Part 1 Part 2

Summary of “A Bad Deal Made Worse – How the PSAs are ripping off Uganda”

* There is currently no transparency over Uganda’s oil contracts, on the part of the Ugandan government or the foreign oil companies. This will prevent positive development outcomes while enabling corruption and environmental degradation on the part of the oil companies. Past experience indicates that without public debate and accountability, the “resource curse” is largely inevitable.

* The Production Sharing Agreements signed in Uganda do not represent the great deal publically claimed by the government. Internal figures modelled by the government indicate that the state will receive 67.5% – 74.2% of total revenue. A Credit Suisse analysis of Heritage Oil predicts government take of between 55% and 67%. PLATFORM’s assessment indicates the government will received between 47.4% and 79.5% of revenues, depending on the price of oil, size of fields, development costs and other factors. The highest figures will only be achieved if the government takes up the possible 15% state participation. These figures are all below the 80+% regularly trumpeted by the government and the oil companies.

* The contracts are highly profitable for the participating oil companies. In the most likely scenarios, Tullow Oil could make a 30-35% return on its investment. This represents a very high profit level for the oil industry, even for risky projects, and indicates excessive profit-taking at the expense of the host government. Even in the least promising (and less likely) scenarios, Tullow would received a 12-14% return – a comfortable profit margin.

* Compared to contracts in other countries, Uganda is receiving a worse deal. Modelling the same field under the terms of Heritage’s contract in Iraqi Kurdistan (a more dangerous environment) indicates that the Kurdistan Regional Government will receive a greater proportion of revenues than Uganda, while Heritage will receive a higher rate of return in Uganda.

* Uganda’s contracts fail to capture increased rent as the oil price rises. This is a major flaw, especially in light of the recent high oil prices. As prices rose through the 2000s, there was a recognition amongst producer governments that the state has a duty to its citizens to capture the rent from higher prices and that the private companies do not have a right to excessive profit-taking. As the oil price rises, the oil companies make a higher and unlimited profit. However, the state take plateaus at under 80%. Thus the oil companies will take close to one quarter of oil revenues, whether the oil price is $70 or $200 – raking in enormous profits.

* Most of the risks lie with the Ugandan state, not the private companies. Price risk lies primarily with Uganda, with the private companies virtually guaranteed a profit even at low prices. While project risk (eg increased costs) are shared between both, Ugandan revenues will fall significantly further if the project runs over-budget.

Eni’s new tar sands projects threaten Congo rainforest

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Plans by oil company Eni to develop tar sands and oil palm in the Congo Basin risk irreversible damage to biodiversity, local communities and our climate, and break the company’s own guidelines, according to Congolese human rights organisations and their international partners. In a report published today, Energy Futures? Eni’s Investments in tar sands and palm oil in the Congo Basin, the groups argue that given their potential for local harm and their huge carbon footprint, such investments should be considered too high risk for Eni or any other energy company.

This is the first tar sands exploration in Africa2, while the palm oil project for food and agro-fuels would be one of the largest on the continent. Eni’s deal was signed in 2008 with the Republic of Congo (Brazzaville), an oil-rich but poor state with minimal transparency and respect for human rights. Forests cover two thirds of Congo and are essential for the livelihoods of local people, as well as a vital carbon sink. Congo’s Government wants to lead on stewarding the global resource of the Basin, but its record on forest law enforcement and environmental protection is weak.

Eni is currently ranked as the world’s most “sustainable” oil company. Most recently, its CEO Paolo Scaroni urged delegates at the UN Leadership Forum in New York to take action on climate change. Yet research shows that Eni’s new investments in Congo are not a step down the path of energy sustainability. “With less than a month to go to the Copenhagen summit, Eni’s projects undermine its green credentials. They also highlight the wider costs of promoting high-carbon, export-driven energy investments – especially in ecologically sensitive areas with poor governance”, commented Barbara Unmüssig, President of the Heinrich Böll Foundation.

Eni’s tar sands exploration is taking place over a huge 1,790 km2 area. The exact location of the oil palm plantation is unknown, but it will claim 70,000 hectares of “unfarmed” land. Eni says neither project will take place on rainforest and areas of high biodiversity or involve resettlement of people. Yet privately, Eni estimates the tar sands zone comprises 50 to 70% rainforest and other highly environmentally sensitive areas. According to Congolese human rights activist Brice Mackosso (Justice and Peace Commission, Pointe-Noire): “Local people, already suffering the impacts of oil development, have not been meaningfully consulted over the new projects. This violates Eni’s own human rights and environmental policies”.

In Alberta, Canada, tar sands development has led to destruction of the boreal forest, air and water pollution, and health impacts for downstream communities. Producing a barrel of oil from bitumen is 3 to 5 times higher in greenhouse gas emissions than conventional oil, and Canadians now have the highest carbon footprint of any G8 citizens. Equally, monoculture plantations for agro-fuels are a major source of the deforestation that accounts for 20% of global emissions. Oil palm cultivation is also linked to increased food insecurity, land conflicts, human rights abuses and threats to indigenous groups.

“Eni’s new projects point to a lack of oversight by its key shareholder, the Italian Government” states Elena Gerebizza of Italian group Campaign for the Reform of the World Bank. “Italy has a clear responsibility to ensure that investments by Eni consider fully their likely developmental and climate impacts, and do not work against the country’s international commitments, such as reducing carbon emissions”.

Download the full report.

Notes
1. The report is published by the Heinrich Böll Foundation, the foundation of the German Green party, and signed by: Bank Track, Campaign for the Reform of the World Bank (CRBM), Fondazione Culturale Responsibilità, Friends of the Earth International, Justice and Peace Commission, Pointe-Noire (Congo), Misereor, Platform, Rainforest Action Network (RAN), Rencontre pour la paix et les droits de l’homme (RPDH, Congo) and Secours Catholique/Caritas. The report is available at: http://www.foeeurope.org/corporates/Extractives/Energy_Futures_eng.pdf, http://www.boell.de orhttp://www.crbm.org.
2. Tar sands (called oil sands by the industry) are deposits of sand and clay saturated with bitumen that must be extracted and processed or “upgraded” to produce synthetic crude oil. These processes are highly intensive in energy and water use. Canada is the only place where industrial-scale tar sands extraction is currently taking place.

Oil corruption in Congo (Brazzaville) – documentary

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Yet another strong documentary from Al-Jazeera’s People & Power series, this time on oil corporations operating in Congo (Brazzaville), corruption and gas flaring.

 

Congo Brazzaville is one of the poorest countries in the world, despite the fact that it produces nearly 300,000 barrels of oil a day.Denis Sassou Nguesso, the country’s president has been in power for all but five of the last 30 years, since a military coup in 1979.

He has long been suspected of siphoning off large portions of the country’s oil revenues but suspicion only turned to proof when documents produced in court showed that oil belonging to the state had financed his son’s spending sprees in Hong Kong, Paris and Barcelona, and on his own stays in luxury New York hotels.

Many of Congo Brazzaville’s four million people are enraged that wealth from the country’s precious natural resources has been spent on luxuries when most of the population lives on less than a dollar day.