Congo Nears Settlement of $619 Million Oil Arbitration Dispute
Congo Nears Settlement of $619 Million Oil Arbitration Case
(Bloomberg) -- The Democratic Republic of Congo is considering settling a $619 million arbitration case by awarding a South African junior oil company almost half that amount in cash and new oil and mining permits.
The settlement with DIG Oil Ltd. would resolve a 13-year dispute over oil licenses in the central African nation. The Johannesburg-based company won the award in 2018 at an arbitration court in France that found Congo failed to honor two production-sharing agreements approved by former President Joseph Kabila’s administration.
The tentative settlement would have Congo pay DIG Oil $8 million as a sign of good faith, with a further $292 million paid through a combination of assets and possibly more cash, according to representatives of the company and the Congolese government. Kasongo Mwema Yamba Yamba, spokesman for the government, didn’t immediately respond to an emailed request for comment.
“The modalities of this are still to be finalized, but are not exclusive to oil concessions and may include mining concessions or any other assets or activities,” Andrea Brown, DIG Oil’s chief executive officer, said in an emailed response to questions. “The resolution of this dispute is aimed at an amicable solution, whilst at the same time promoting further investment in the DRC.”
The Paris-based International Court of Arbitration decided in November 2018 that Congo “failed to execute its obligations” and should pay DIG Oil $617.4 million to cover future economic losses and already incurred expenditure. An appeal court in Paris dismissed Congo’s bid to overturn the award in January 2020, and the amount has increased to $619 million including costs.
Congo, one of the world’s poorest countries, only had $671 million in reserves at the end of February, according to the most recent central bank data.
Reallocating Blocks
Congo’s Oil Ministry granted DIG Oil a contract for three blocks in the center of the country in December 2007, and another permit on Lake Albert to a group of investors including the company a month later, but Kabila never signed off on either deal.
The arbitration court agreed with DIG Oil that Congo violated the second agreement by reallocating the Lake Albert license in 2010 to a company controlled by Israeli billionaire Dan Gertler and failed to deliver presidential approval for the other blocks “within a reasonable time.”
Last April, DIG Oil began enforcement proceedings in the U.S. at the District Court for the District of Columbia. Congo was eventually declared in default after failing to respond to a summons.
According to a summary shared by a member of Congo’s negotiating team, the settlement is meant to halt the enforcement action, prevent Congo from depleting its reserves to pay the award, and relaunch the development of the Lake Albert oil block.
Gertler’s companies hold two blocks on the lake, which borders Uganda. He is currently under sanction by the U.S. Treasury for alleged corruption in Congo, complicating efforts by the administration of President Felix Tshisekedi to transfer the blocks to other buyers. Gertler denies any wrongdoing and hasn’t been charged.
Uganda this week signed a $5.1 billion deal with Total SE to develop its side of Lake Albert and build a pipeline to the port of Tanga in Tanzania. The French major said oil would start flowing in early 2025.
Brown said there is no mention of the Lake Albert block in the draft settlement agreement.
DIG Oil also indirectly holds a 42.5% stake in Congo’s oil block three along its border with Uganda. South Africa’s Efora Energy Ltd. indirectly holds the same-sized stake, with the Congolese state holding 15%.
Gertler didn’t respond to requests for comment through a spokesman.
©2021 Bloomberg L.P.