Null and void? CoMiCo’s oil aspirations in DRC

In 2007, Guernsey-owned company Compagnie Minière Congolaise (CoMiCo) signed a contract for the rights to three oil blocks in DRC, under a previous version of the country’s oil law which was superseded in 2015 by a new oil code. One of the blocks encroaches on Salonga National Park, the largest protected tropical rainforest in Africa and a UNESCO-protected World Heritage Site.

In February 2018, CoMiCo gained presidential approval for the contract, apparently giving the company its long-awaited green light for oil exploration to go ahead – with potentially huge risks for Salonga’s fragile ecosystem and endangered species such as bonobos.

However, our analysis of the contract under Congolese law shows that rather than give CoMiCo the go-ahead, the presidential ordinance may have rendered the contract null and void.

Felix Tshisekedi has recently been declared the winner of a disputed presidential election in DRC. President Tshisekedi and his administration must seize the opportunity to improve upon the record of the previous government by enforcing strict adherence to Congolese law in natural resource deals, especially in terms of transparency around contracts and the real beneficiaries behind natural resource companies.

According to our analysis, under both Congolese law and the stipulations of CoMiCo’s contract itself, the contract formally came into effect once presidential approval was given in February 2018. However, the contract contains clauses which are inconsistent with DRC’s new oil code, dating from 2015. The law makes it clear that any contract that has been “regularly acquired” after 2015 cannot contravene the 2015 oil law, “under penalty of being void”.  

The 2018 approval has, according to our analysis, effectively locked in clauses of the contract which are incompatible with the present oil code, and in so doing may have rendered it invalid.

Specifically, CoMiCo’s contract is not in line with the 2015 oil law’s provisions on area taxes, royalty rates, profit oil, or exploration license renewals. Most of the key ways in which it deviates from the current law favour CoMiCo, potentially at the expense of the DRC’s public purse.

CoMiCo’s lawyer disagreed with this interpretation of the Production Sharing Agreement’s (PSA) terms and the DRC legal framework, calling the analysis “clearly wrong”. In response to questions from Global Witness, the lawyer argued that “the 2015 Hydrocarbon Law by its own provisions does not apply to the PSA, except in respect to environment, security and hygiene provisions.”

It is not only the deal itself but the company behind it that is a cause for concern. The complete list of CoMiCo’s past and present owners is shrouded in secrecy.  In investigations following the approval ordinance in 2018 Global Witness found that at its formation, on the 17th April 2006, CoMiCo was linked to Monfort Konzi - a former Congolese politician who was a cabinet member of the Mouvement de Libération du Congo, and Idalécio de Castro Rodrigues Oliveira - a businessman later convicted of corruption as part of Brazil’s Car Wash Investigation, in relation to the sale of an unrelated oil block. Lawyers representing CoMiCo said de Oliveira is not a direct or indirect beneficial shareholder of CoMiCo. Today, the present ownership of the majority of the company is hidden behind a nominee company.

As well as the questionable contract and the opacity around CoMiCo’s owners, these oil rights are particularly controversial because one of the blocks covered by the PSA encroaches on Salonga National Park, as we revealed in our previous briefing. The park is the largest area of protected rainforest in Africa and home to 40 percent of the world’s remaining bonobo population, as well as several other rare and endangered species. Salonga National Park’s size means it plays a fundamental role in climate change mitigation and carbon storage. Any oil activities in the area could have potentially devastating environmental consequences.

Following CoMiCo’s presidential ordinance in February 2018, the DRC government announced the creation of an inter-ministerial commission to examine the possibility of ‘declassifying’ sections of both Salonga and Virunga National Parks to allow oil exploration to take place. The declassification envisaged would mean altering the boundaries of the parks so that areas that fall under oil licences were no longer inside park borders and as a result would no longer be covered by the protections afforded to national parks and UNESCO World Heritage sites.

Global Witness asked CoMiCo to make a public statement committing to not explore for oil anywhere within the current boundaries of Salonga National Park, regardless of any future changes.

In response, CoMiCo’s lawyer said: “My client’s position as to the Salongo [sic] National Park is as previously stated: it has no intention of drilling within the boundaries of the national park.” Given the risk that the DRC government might choose to redraw the boundaries of Salonga National Park to facilitate oil drilling, CoMiCo’s comment falls short of a strong and binding commitment to stay out of Salonga’s existing territory.

The allocation of this block to CoMiCo and the establishment of a declassification commission casts doubt upon the strength of the previous DRC government’s commitment to protect the environment, and could even sound alarm bells about the future of all five of the UNESCO World Heritage sites in the country, which between them cover almost seven million hectares of land. It is especially concerning that Salonga National Park is being put at risk on the back of a questionable PSA in the hands of a largely opaque company, that is so far unwilling to make a meaningful pledge to protect the area. It is vital that President Tshisekedi’s new administration affirms DRC’s commitment to environmental protection.

The previous government appears to have disregarded its own oil law, which was designed in part to ensure that DRC profits from its wealth in natural resources. In doing so, it has put at risk a UNESCO-protected World Heritage Site and approved a contract with fiscal terms that seem to be less favourable than those called for in DRC’s own 2015 oil law. This calls into question the capacity and willingness of DRC’s previous government to act in the best interest of the Congolese people when managing the country’s natural resources.

The new Congolese president Felix Tshisekedi and his administration urgently need to review CoMiCo’s contract and others made under the Kabila regime, to ensure that they are in line with Congolese law and that the Congolese people will benefit from the country’s oil sector.

If CoMiCo’s oil exploration were to go ahead, it would set a dangerous precedent of the government effectively contradicting its own laws to grant deals that are potentially to the detriment of the environment and the public purse.

In light of our analysis, we are calling for the relevant actors to take the following key actions:

• ·The new Congolese government should review CoMiCo’s contract in light of the questions raised by our analysis.
  
• The new Congolese government should dismantle the inter-ministerial commission that was set up to examine declassification projects for Salonga National Park, and renew its international commitments to protect World Heritage Sites immediately by cancelling all oil blocks or natural resource concessions which impinge on these sites or their buffer zones and commit to not grant any new blocks in those areas in the future.
  
• The new Congolese government should enforce the transparency terms of DRC’s oil law, including by publishing contracts on the Oil Ministry website.
  
• All extractive companies in DRC, including CoMiCo, should make public details of their full beneficial ownership, so that the people of DRC know exactly who has gained control of their natural resources.
  
• CoMiCo should join the DRC chapter of the Extractive Industries Transparency Index (EITI) and publish all information on its payments to government and beneficial ownership in line with EITI standards and international best practice.