UK-based Tullow Oil is weighing up its options after the Democratic Republic of Congo stripped it and South Africa's Divine Inspiration of their rights to blocks 1 and 2, in the country's Lake Albert play, handing the acreage to British Virgin Islands-based newcomers Caprikat and Foxwhelp. “The award of these licences to unknown British Virgin Islands registered companies does nothing to help Africa build any sort of reputation for transparency,” a Tullow spokesperson told Upstream.
He confirmed earlier Reuters reports that a presidential decree had effectively stripped Tullow and Divine of the licences, awarding them to Caprikat and Foxwhelp.
“Furthermore, no legitimate company will farm in to blocks with an unknown company so I fail to see how these blocks are going to be developed for the benefit of the people of DR Congo,” he said.
The blocks had previously been awarded to Tullow in a 2006 accord in which the company paid a $500,000 signing bonus, and South Africa's Divine Inspiration Group also claims rights to Block 1 after a 2008 deal in which it paid $2.5 million.
The Ministry of Mines is seeking a $6 million signature bonus from Caprikat and Foxwhelp for the awards, according to a letter dated 10 June and seen by Reuters.
Tullow said it was reviewing its options, but had no doubt of the legal validity of its claim.
David Hart, an analyst at Westhouse Securities, said: “It’s unfortunate but that’s politics in DR Congo.
“You won’t find anyone that was attributing a lot of value to these blocks. The blocks are in a very prolific area...potentially very valuable...but they have always been very risky.”
The news comes about a month after advocacy groups urged DR Congo to renegotiate the terms of the deals.
Platform, a London-based human rights and environmental pressure group, which in May released copies of the production sharing contracts signed by Tullow and a South African company, Divine Inspiration, said: "Urgent changes should be made to the contracts, legislation and regulatory regime covering oil."
Platform said DR Congo was offering terms in the contracts that would allow the companies to reap excessive profits without enough upside for the state, and that also fail to properly address transparency, health and environmental concerns.
The group added that Tullow's contract appeared less favourable to the state than Divine's.
"If recognised, Tullow's contract will cut Congolese government revenues by over $10 billion (in comparison to the Divine contract) - a figure equivalent to the country's entire national debt," Platform said.
Tullow said it was pointless to compare possible revenue streams to the government when the blocks had not been explored yet.
"Tullow fully recognise the sensitivity of resource extraction in the DRC and are committed both to transparency in our operations and to the highest standards of environmental protection," spokesman George Cazenove told Upstream in an email.
"However, discussion and quantification of potential revenues, royalties, payments or to the DRC government is absurd and premature given that no exploration of the licence area has taken place and no agreements have been ratified."
Tullow holds a development deal on the Ugandan side of the lake and had been hoping to join them with the Congolese blocks.
Tullow loses DR Congo injunction:
London-listed Tullow Oil has lost an injunction to stop two offshore companies developing oil blocks to which it lost the rights in Democratic Republic of Congo, according to a court ruling.Tullow Oil was awarded rights to Blocks 1 and 2 of Congo's Albertine Graben in 2006.
It is pursuing legal action against Congo and two British Virgin Islands-registered companies to which President Joseph Kabila re-awarded the rights in June.
A court ruling seen by Reuters said Tullow's prospects of regaining the blocks were "precarious" and refused to renew an interim injunction first granted in September to prevent the companies from developing the blocks.
"It is my view that the balance of convenience comes down firmly in favour of refusing to continue the interim injunction," said Commercial Court Judge Edward Bannister, sitting in the Eastern Caribbean Supreme Court in the British Virgin Islands, where the two offshore companies- Caprikat and Foxwhelp - are registered.
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