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Italian, Congo Venture May Spend $420 Million on Fuel Network

Italian, Congo Venture May Spend $420 Million on Fuel Network

(Bloomberg) --

A joint venture between two Italian-owned firms and the Democratic Republic of Congo’s state-owned oil company plans to spend as much as $420 million overhauling the nation’s fuel-distribution network.

The firms owned by businessman Giuseppe Ciccarelli signed an agreement last year with state-owned Société Nationale des Hydrocarbures, or Sonahydroc, to modernize infrastructure used to import, store and distribute refined petroleum products, according to a decree signed last December by four ministers.

The joint venture between the companies -- known collectively as FTL -- and Sonahydroc is designed to increase the government’s stake in the downstream oil industry, which supplies fuel to the nation’s crucial mining sector, Ciccarelli said in an interview Dec. 13. It also aims to reduce gasoline prices that are among the highest in Africa.

Congo is the world’s biggest cobalt producer and Africa’s largest source of copper where miners including Glencore Plc and China Molybdenum Co. operate. The companies rely on huge fleets of trucks to export minerals and use diesel generators to offset a shortage of electricity.

Ciccarelli controls Fuels Transport Logistics-Pipeline SA and Fuels Transport Logistics-Storage SA through Luxembourg-based Medea Development SA. They will work with Sonahydroc to upgrade existing infrastructure in western and southeastern Congo, according to the decree.

Barged In

The existing fuel-supply network in west Congo allows refined products imported from the Atlantic Ocean to be barged and piped to the capital, Kinshasa. In the southeast, products are trucked from neighboring Zambia to serve the mines and population.

Sonahydroc and FTL will build storage depots and a pipeline from the Congo-Zambia border to the mining hub of Lubumbashi, according to Ciccarelli. In the west, they are completing technical and environmental studies for a transport system to connect an offshore loading buoy via pipeline to the city of Matadi, he said. Fuel is currently moved from the coast to Matadi up the Congo River via barge from where two pipelines take it to Kinshasa.

The initial investment in the southeast will be about $100 million and could rise to more than $420 million if Congolese authorities approve the western part of the project, Ciccarelli said.

In western Congo, Sonahydroc is entitled to “recover and modernize” the state’s stakes in the existing Matadi-Kinshasa pipelines and storage facilities, according to the decree. French oil major Total SA and South African fuel retailer Engen Ltd. are the Congolese government’s co-shareholders in that infrastructure. Total and Engen didn’t respond to request for comment.

While Sonahydroc Director-General Hubert Miyimi didn’t respond to a request for comment, the state-owned company “is in the process of identifying the most appropriate strategy in order to optimize the use of this national infrastructure,” Ciccarelli said.

The decree was signed shortly before an election in which President Joseph Kabila was replaced by former opposition leader Felix Tshisekedi. Kabila and Tshisekedi are ruling Congo in coalition through a power-sharing government after the former leader’s allies won parliamentary majorities. The joint venture “can progress further only with the acknowledgment and support of the new president and government,” Ciccarelli said.

The Italian previously ran a Congolese oil exploration and production company that belongs to Dan Gertler, an Israeli businessman sanctioned by the U.S. Treasury in December 2017 for having an allegedly corrupt relationship with Kabila.

Medea Development’s “technical assistance contract” with Gertler’s company ended in 2015 and Ciccarelli stopped working there the following year, Ciccarelli said.

To contact the reporters on this story: William Clowes in Abuja at wclowes@bloomberg.net;Michael J. Kavanagh in Kinshasa at mkavanagh9@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Hilton Shone

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