Oil Laps Lake Albert's Western Shore

BMI View: A company working on blocks 1 and 2 along the western shore of Lake Albert in the Democratic Republic of Congo (DRC ) announced the area could hold as much as 2bn barrels of oil. While we agree there are excellent prospects for oil due to large volume discoveries on the Ugandan side of Lake Albert , we highlight the challenging business and political environments may pose difficulties to the potential monetisation of the area.

According to Giovanni Pedaci, Oil of DR Congo 's G eneral M anager, blocks on the Eastern shores of Lake Albert could contain reserves of as much as 2bn barrels of oil. The announcement comes after reports that the second phase of seismic acquisition was completed in August , however it was stipulated that significant investment would be needed to prove the potential of the identified structures through drilling.

This announcement provides a further bright spot for the Congolese oil industry after French company Total committed to investing US$10bn in the offshore Moho Nord project. Moho Nord is expected to add 140,000 barrels per day (b/d) to Congolese oil production by 2017 , around seven times more than the 2 0,000 b/d currently produced.

Output Limited In DRC
Oil Production 2002-2012, '000b/d

Oil Laps Lake Albert's Western Shore

BMI View: A company working on blocks 1 and 2 along the western shore of Lake Albert in the Democratic Republic of Congo (DRC ) announced the area could hold as much as 2bn barrels of oil. While we agree there are excellent prospects for oil due to large volume discoveries on the Ugandan side of Lake Albert , we highlight the challenging business and political environments may pose difficulties to the potential monetisation of the area.

According to Giovanni Pedaci, Oil of DR Congo 's G eneral M anager, blocks on the Eastern shores of Lake Albert could contain reserves of as much as 2bn barrels of oil. The announcement comes after reports that the second phase of seismic acquisition was completed in August , however it was stipulated that significant investment would be needed to prove the potential of the identified structures through drilling.

This announcement provides a further bright spot for the Congolese oil industry after French company Total committed to investing US$10bn in the offshore Moho Nord project. Moho Nord is expected to add 140,000 barrels per day (b/d) to Congolese oil production by 2017 , around seven times more than the 2 0,000 b/d currently produced.

Output Limited In DRC
Oil Production 2002-2012, '000b/d

Albertine Basin Potential

While significant investment will be required to drill potential oil bearing structures to the west of Lake Albert, positives can be taken from the recent success experienced across the border in Uganda. Congo's neighbour in the northeast has seen its oil reserves increase from zero in 2010 to 2.5bn barrels in 2013 following successful exploration programmes around Lake Albert. London listed explorer Tullow has been the biggest winner discovering around 1.2bn barrels. Total and CNC also operate acreage in the area.

Due to Tullow's considerable discoveries, plans for export infrastructure and a refinery have come to the forefront of development. The country is preparing to build a 30,000b/d refinery as well as a pipeline which would connect the resources at Lake Albert with the Port of Lamu in Kenya. Though no firm decision has yet been made and delays in project development in the area have already been experienced, export infrastructure will be needed to connect the isolated Ugandan resources to market. Further backing to this will come from the recent announcement that a Japanese firm is set to lay a pipeline from South Sudan's oilfields to Lamu, Kenya, which would inter-connect with the pipeline from western Uganda.

Any development on the Congolese side of Lake Albert could therefore tie in to the export infrastructure through Uganda and Kenya at a relatively low cost. Without this infrastructure, potential Congolese oil finds would remain stranded. As Lake Albert is on the eastern most point of the DRC, the shortest distance to a sea port would be through Uganda and Kenya rather than going west to the DRC's Atlantic coast.

Business Environment And Politics Could Hinder Potential

However, we do highlight the difficult business environment in the central-east African region and note that political interferences has on many occasions hindered oil and gas developments. Our business environment ratings for the countries in the surrounding region of Lake Albert rank poorly globally while the DRC is placed someway behind its peers.

Congo DRC Lags Behind
Business Environment Rating Of DRC And Surrounding Countries

Despite strong upside potential for the DRC's onshore oil industry through positive seismic data and major discoveries in neighbouring Uganda, a challenging business environment could dissuade major players from entering the market. Furthermore, the oil companies on the other side of the Lake in Uganda may refrain from working with Kinshasa at the behest of partner Tullow. In 2006, Tullow was awarded the rights to blocks 1 and 2 on the western shore of Lake Albert, though in 2010 President Joseph Kabila re-awarded the license to the two companies which form Oil of DR Congo. As the initial deal was not ratified by the Presidency Tullow had little room to appeal, opening the door for Oil of DR Congo to move ahead with its exploratory work.

The prospect of moving forward with the development of the Lake Albert blocks remains a highly prospective venture. While the below ground rewards are expected to be high, above ground risks could deter the potential investment partners Oil of DR Congo requires and delay progress. For this reason we believe that for now, the best opportunities in Congo lie in its limited but under explored Atlantic offshore.

×

Enter your details to read the full article

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

×

REQUEST A DEMO

By submitting this form you are acknowledging that you have read and understood our Privacy Policy.

Thank you for your interest

A member of the team will be in touch shortly to arrange a convenient time for your free demonstration and trial. If your enquiry is urgent, please email our Client Services team here.