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sharing in governance of extractive industries

DRC has awarded PSAs on Lake Albert to Caprikat and Foxwhelp. The Guardian reports that BVI registered Caprikat and Foxwhelp are owned by Khulubuse Zuma (a member of the South African president's family). I don't take this as a good sign for governance of the Lake Albert region. 1) It doesn't make much sense to have different fiscal regimes on different sides of the Lake as any oil production and export would have to be through shared infrastructure. 2) It is a troubling development that unknown private companies will be exploring in such an environmentally and politically sensitive area.

From upstreamonline

DR Congo 'tears up Tullow deal'

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.

Aleya Begum, Anthea Pitt & news wires 24 June 2010 13:26 GMT

“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."

At the time Tullow dismissed Platform's claims but declined to make any specific comment.

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 holds a development deal on the Ugandan side of the lake and had been hoping to join them with the Congolese blocks.

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Comment by Victor Ngeny on June 29, 2010 at 14:54
Tullow is also facing some kind of problem in Uganda, something to do with contracting I think..

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