H Oil and Minerals Ltd

Local Companies in Scramble for DRC Oil

Sunday 17 August 2008

This item first appeared in the Johannesburg Sunday Times on 18 August 2008:

State petroleum company PetroSA is embroiled in a dispute over oil exploration in the Democratic Republic of Congo, where it stands accused of poaching a concession from an international company, Tullow Oil.

At stake is the right to prospect one of the continent’s most promising oil fields in the mineral-rich Great Lakes District, already a hive of mining activity as companies jostle for a share of the continent’s riches.

PetroSA this week confirmed its interest in the DRC, but declined to divulge details of any dispute there. Tullow this week came out firing, accusing PetroSA of backing a South African business consortium that has been awarded a concession to the same oil block - a largely offshore area in Lake Albert between the DRC and Uganda.

Now the South Africa consortium, led by South African businessman Tiego Moseneke, has joined the fray and hit back at Tullow, accusing them of sour grapes.

The row is erupting against the backdrop of fierce competition for mining or resource concessions in the volatile DRC, with South African companies set to benefit from close bilateral relations. South Africa has been actively involved in peacekeeping efforts in the strife-torn east of the vast country and PetroSA this week again confirmed the DRC was an integral part of its business strategy.

“PetroSA, as the national oil and gas company, interacts frequently with its counterpart (Cohyrdro) in the DRC and as part of our business development activities we review oil and gas opportunities in all prospective areas,” is all PetroSA would say about its Congolese ambitions when approached by the Sunday Times. Spokesman Thabo Mabaso said that while the company was aware of Tullow’s claims regarding the disputed concession, it could not “conclusively confirm them”. PetroSA had no financial stake in the SA consortium, Divine Inspiration, Mabaso said.

By contrast Tullow did not pull any punches when contacted by Business Times on Friday. Their vice-president of African business, Tim O’Hanlan, accused the SA-led consortium - backed by PetroSA - of muscling in on their turf, despite full knowledge of Tullow’s existing concession. He said Tullow had tried unsuccessfully to resolve the matter with PetroSA, with whom they had collaborated on other oil and gas projects. Tullow’s Congolese concession followed extensive negotiations and substantial investment in the project to date - about $250 million this year in their Uganda oil blocks, which form part of the same prospecting area.

“This is a tiny lake in the centre of the continent, split between two countries, and needs a single holistic approach,” O’Hanlan said.

“It’s extremely important that these concessions are prospected together in a single effort.”

He said the project had the potential to cement frayed relations between Congo and Uganda: “It’s a page-turner for their (Congo’s) relationship with Uganda. It’s the type of catalyst needed to unite two parties that would normally be in conflict.”

The concession was controversially cancelled by the DRC’s Lambert Mende, the hydrocarbons minister, late last year after a border shooting that cost the life of a Tullow contractor.

While Tullow continues to contest the minister’s decision in the Kinshasa High Court, Mende has signed a new partnership agreement with the SA consortium, allegedly with the backing of PetroSA. O’Hanlan said: “It is shocking for us that they (PetroSA) would do this. It’s just not something you do. As oil companies we are in partnership all over the place. You’re going to be doing business together somewhere if you’re not already. So this is wild behaviour.”

However, Moseneke on Friday defended the SA consortium, saying they had negotiated with the DRC government in good faith and were eager to take advantage of a good business opportunity. He confirmed the consortium had the backing of PetroSA: “A consortium with PetroSA acquired certain oil concessions in the DRC which included Block One Graben Albertine (on Lake Albert) and those negotiations culminated in the signature of a production-sharing agreement which was properly executed by the DRC government. It’s all above board. There were elaborate processes with a diverse DRC delegation,” Moseneke said.

“It may be that Tullow has a legitimate complaint against the DRC government. Even if they did they could not visit that on us and other parties involved. Whatever agreements were concluded with Tullow, the DRC decided to cancel those agreements for whatever reason. When those agreements were cancelled we were not even interested in this specific (concession) block. After the cancellation the DRC government invited interest in the new block and we responded to the invitation - and succeeded in acquiring that block.”

Energy minister Buyelwa Sonjica’s spokesman could not be reached on Friday for comment. O’Hanlan said he hoped PetroSA would reconsider its position so that the two companies could collaborate again on future exploration projects.

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