Dan Gertler. Picture: BLOOMBERG / SIMON DAWSON
Dan Gertler. Picture: BLOOMBERG / SIMON DAWSON

Kinshasa/Lagos — Democratic Republic of Congo (DRC) is forming a plan to take back two oil blocks from sanctioned Israeli billionaire Dan Gertler and sell them to another company.

The Congolese government has talked to Tullow Oil about purchasing a stake in the Lake Albert licences along the country’s border with Uganda, said four people with knowledge of the discussions. Total and Eni had also showed some interest, two of the people said.

Tullow declined to comment. Eni said in an e-mailed statement that it was not interested in the blocks. A spokesperson for Total said the company had left DRC and was not interested in the licences.

The blocks could have been be a natural fit for Tullow and Total, which already share rights to adjoining areas on the Ugandan side of the lake where more than a billion barrels of oil have been discovered. The DRC licences have long been regarded as having the potential for large discoveries, but proper exploration has been held up for years by legal and political wrangling.

Any deal would be difficult because Gertler is subject to US sanctions, the people said. The US government accused the Israeli billionaire in 2017 of amassing a fortune through “opaque and corrupt mining and oil deals in DRC” and using “his close friendship with DRC President Joseph Kabila to act as a middleman for mining asset sales”. Gertler has repeatedly denied all accusations of wrongdoing.

Complex negotiations

DRC’s production sharing agreements for oil blocks 1 and 2 are with two of Gertler’s companies, Caprikat and Foxwhelp. Both are sanctioned, as is the company that manages them, Oil of DRCongo. In May, DRC’s oil ministry extended the rights to the permits until June 2021.

To start the transfer process, state-owned oil company Sonahydroc would first take over the DRC government’s 15% interest in each of the two blocks, according to two of the people and an August letter sent by former interim oil minister, John Kwet Mwan Kwet, to DRC president Felix Tshisekedi, which was seen by Bloomberg News. Gertler’s companies would then fully relinquish their 85% stake in the blocks to Sonahydroc.

A new partner would then take those 85% holdings in the blocks, setting up a joint venture with Sonahydroc, according to the letter and the people. That arrangement with the state oil company could let DRC avoid an open tender process, which would be required if the permits fully reverted to the state, said one of the people. DRC has set up a monitoring committee to handle “the complexity of the negotiations”, according to the letter.

Sonahydroc declined to comment, while DRC’s oil ministry did not respond to requests for comment.

Compensation payment

Gertler’s company, Oil of DRCongo, said by e-mail that it has spent €150m to explore and develop the blocks. The oil ministry letter gave a lower figure of $135m, while an archived version of the website of Gertler’s Fleurette Group from 2017 said they’d spent only $100m.

If the proposed transaction were completed, Gertler’s company could receive compensation of as much as $150m, two of the people said.

“Oil of DRCongo is ready to listen positively to proposals from potential partners upon the condition that they have the capability, experience and intent to invest in the DRC without hesitation or question,” the company said by e-mail. The blocks hold about three-billion barrels of oil in place, according to the Fleurette Group’s 2017 web page.

Tullow has a long history in the Lake Albert region, starting to drill on the Ugandan side in 2006 and eventually discovering about 1.7-billion barrels of contingent oil resources. The London-based company signed a production sharing agreement for the two blocks in DRC in 2006, but never received the required authorisation from Kabila. He gave the licences to Caprikat and Foxwhelp in 2010, prompting Tullow to initiate legal action, which was later withdrawn.

DRC and Uganda still need to agree on a pipeline project to ship oil from the Lake Albert deposit in the centre of Africa to a port, most likely travelling from Hoima in western Uganda to Tanga, Tanzania, according to the oil ministry letter.

Bloomberg