Lake Kivu Gas Exploitation Hindered by Hydrocarbon Code’s Silent Gas Tax Regime
Lewis Yola, an expert in downstream oil and oil contract negotiations and a member of the “Congo N’est Pas à Vente” (CNPAV) coalition, believes that the lack of clarity in the hydrocarbon code regarding the tax regime specific to gas could create a deadlock in negotiations between the three companies and state representatives.
This issue emerged after the Ministry of Hydrocarbons publicly announced, on January 13, 2023, the selection of three companies for the exploitation of three gas blocks in Lake Kivu.
These companies include Symbion Power & Red (Makelele block), Alfajiri Energy Corporation (Lwandjofu block), and Winds Exploration and Production LLC.
On February 13, 2023, Minister Didier Budimbu established a negotiation commission for the different gas blocks. Winds Exploration was given a 37-day negotiation period, with negotiations expected to conclude no later than March 20, 2023.
However, as of now, there has been no progress in the negotiations, and Lewis Yola expressed concern that the situation remains a mystery to the general population despite clear regulations in articles 60 to 80 of the hydrocarbon regulations regarding negotiation timelines.
The key issue appears to revolve around the taxation framework for the gas contracts. Since the law does not specifically address gas taxation, there is a debate about whether the same tax regime that applies to oil should also be applied to gas. This has become a contentious point, with companies reluctant to accept this taxation model.
Another potential obstacle to the negotiation process is the financial and technical capacity of certain selected companies. For example, ALFAJIRI, chosen to exploit the Lwandjofu Block, has reportedly faced challenges in meeting fundraising requirements, which could impede the exploitation of this lucrative block.
Given these roadblocks to the exploitation of gas fields in the DRC, Lewis Yola calls on President Félix Tshisekedi to intervene and reconsider the case of ALFAJIRI, which he believes may be incapable of fulfilling the contractual obligations necessary for the exploitation of the Lwandjofu block.
Regarding the dispute over the tax regime, Yola points out that the DRC has prior experience with gas contracts, referencing a 2021 agreement between Perenco-Rep, and the Congolese State for exploiting methane gas in the coastal basin.
He suggests that this previous agreement could serve as a source of inspiration for resolving the current tax-related disagreements.
Yola by emphasized the potential losses of up to 1 billion USD if the lack of transparency in the awarding and negotiation processes for oil and gas blocks in the DRC is not addressed.
