Congo’s oil auction: foiling climate colonialism or filling the coffers?

On 28-29 July, the Democratic Republic of Congo (DRC) prompted protest and concern as it put the licensing rights for 30 oil and gas blocks up for auction. Despite the government’s reassurances than none of these zones are in environmentally sensitive zones, analysis has shown that nine of them overlap with protected areas in the world’s second-biggest rainforest including the Virunga UNESCO World Heritage site.

So are these important lines of defence against the biodiversity and climate crises about to be drilled? A look at the strategies of President Félix Tshisekedi’s regime suggest we can’t rule this out, but that this latest move may be geared towards other goals.

Replenishing the coffers

The DRC’s oil sector, which the president keeps under tight control, has long been a major source of patronage and rent-extraction for the government. As previous research shows, however, income from this industry has not come from developing it but by selling access to it. For decades, Congolese oil policy has focused on generating short-term access to cash – reflecting the interests and time horizons of politicians – rather than on nurturing major long-term investments. Ministerial budgets have been diverted by officials, and budgets assigned for exploration have not been used.

Instead, most activity in the DRC’s oil sector has involved securing lucrative deals with companies. Previous research has shown how these corporations typically pay the government over $1 million to sign Memoranda of Understanding (MOUs) – once informal “taxes” are included – and several millions to complete Production Sharing Contracts (PSCs).

Around 2010, for example, Congo’s oil ministry signed 34 MOUs, bringing in hundreds of thousands of dollars each, before tearing most of them up. The mostly unknown companies involved – some of which were conjured up by officials – were offered easy profits from promptly selling on their rights, many of which overlapped, at much higher prices. The new owners would, in turn, try to make further profits by flipping the asset further. At no point in these exchanges was there any suggestion of developing the blocks.

There are no indications that the DRC’s recent auction is any different. 16 months before the 2023 elections, the government needs to show its capacity to “deliver” and quick access to income.

The Tshisekedi administration is facing significant challenges on these fronts, with foreign aid coming with increasingly stringent conditionalities or not arriving at all. The $250 million promised by the World Bank for the recovery of eastern Congo in June 2021 has not yet materialised. Only 19% of the $225 million budgeted by the UNHCR has been secured, leading it to close parts of its programmes. And financing for the Nairobi Process to tackle the conflict in eastern DRC is difficult to obtain.

Against this backdrop, oil-related income offers a way out – and not for the first time. Before the 2018 elections, there was a similar burst of activity in the oil sector following years of inaction. Contracts were extended, renewed, or given presidential approval, while there was talk of de-classifying parts of Virunga and Salonga national parks. At the time, this was understood as a search for cash, and no oil production developments have been made since then. There has been no development in and of the existing blocks nor of any infrastructure necessary for exploration or extraction. The fact that the government has opened up the current auction to carbon credit and cryptocurrency companies is a further indication that exploitation is not the eventual goal.

In the words of Didier Budimbu, the hydrocarbons minister: “With or without oil, what’s important is that we earn.”

Reclaiming sovereignty over the forest

As well as generating funds by selling access, the auction of the oil blocks might also be aimed at giving the government leverage to obtain more international climate finance and reclaim sovereignty over its forests.

Since 2009, the DRC has been engaged in the Reducing Emissions from Deforestation and Forest Degradation (REDD+) process. Developed by parties to the UN Framework Convention on Climate Change, this is the prevailing mechanism for developing countries to value the environmental services their forests provide – for instance through selling carbon credits – and curb deforestation. From 2015 to 2020, the multilateral Central African Forest Initiative (CAFI) invested $200 million in REDD+ programmes and reforms in the DRC. At COP26 in 2021, CAFI’s main donors signed a renewed ten-year agreement and pledged $500 million over the next five years to scale-up REDD+ investments in the Congo.

The sale of oil blocks has raised concerns about this agreement. The oil concessions include 11.2 million hectares of rainforest, including protected areas and 1 million hectares of peatland. Yet studies have already questioned the credibility of the climate programme. While $500 million over five years may sound a lot, researchers estimate that Central African countries will need over $350 billion to reach their contributions to the Paris Climate Agreement. Moreover, as Environment Minister Eve Bazaiba recalled in a recent speech, rich polluting countries have miserably failed to meet their 2009 pledge to provide $100 billion a year to help poor countries address climate change.

The Congolese government has further reasons to be frustrated. Congo Basin countries systematically receive less funding than the Southeast Asia and Amazon basins, which some analysts attribute to weak diplomacy capacity. The CAFI process has been frustratingly slow; by the end of the first $200 million agreement in December 2020, just $70 million had been spent on programmes. And from the outset, the REDD+ programme has been heavily donor-driven. The government has had little control over strategy and funding bypasses state entities .

In several recent interviews, Tosi Mpanu Mpanu, DRC’s lead negotiator on climate issues, has emphasised how small the financial returns from the DRC’s climate and environmental services to the world are in comparison to potential benefits from oil exploitation. “Maybe it’s time we get a level playing field and be compensated,” he said to The New York Times.

All this explains the increasingly difficult relationship between the environment ministry and REDD+ donors. In 2018, a ministry official accused the latter of not respecting Congolese laws and of “bringing an entire state to its knees”. Mpanu Mpanu recently asserted that the DRC will not accept “climate colonialism”. On the other side, two sources have suggested that Norway, the world’s biggest REDD+ donor, has pushed for the DRC’s Ministry of Finance to take management of the CAFI and REDD+ operations from the Ministry of Environment in which it has little trust.

In this context, the auction of oil blocks is a way for the environment ministry and the state more generally to reclaim authority over the country’s forest policies and independence from multilateral donors. The Minister of Hydrocarbons has said they would accept bids from carbon market start-ups that propose to keep oil in the ground. These kinds of trades would allow the government to negotiate benefit-sharing of carbon credit revenues directly with investors and thus potentially increase its share of revenues compared to donor-driven projects.

Is drilling impossible?

Does this mean it is impossible oil exploitation will happen? Not necessarily.

The Congolese government has past record of awarding illegal concessions when it deems it worth the downsides. In 2018 and 2020, for instance, the DRC allocated logging concessions covering an area the size of Denmark in breach of its own 20-year-old moratorium and REDD+ engagement with CAFI. A high-ranked official at the Ministry of Environment explained the rationale to one of us at the time, saying: “[it’s like if] you don’t have access to the food but you need it…you will find a roundabout way to access it…$200 million is a drop of water in the ocean. With 500m³ of Afromorsia [African teak], I have $200 million”.

It is also notable that the environment ministry has recently emphasised the environmental feasibility of oil exploitation. Its collaboration with the Ministry of Hydrocarbons supposedly enables it to carry out environmental and social impact studies of oil exploitation projects and select companies that use advanced technologies to reduce those impacts. The DRC’s commitment through CAFI does not ban investments in hydrocarbons. In fact, the REDD+ strategy has always supported the development of industrial and extractive sectors in non-protected areas, but subjects them to REDD+ norms.

A final factor pointing to the possibility of exploitation is Congolese tourism minister’s recent threat that Virunga Park could be taken over by the military, replacing the current civilian (foreign) management. Many are concerned that such a move would facilitate the opening up of the park to drilling.

The current auction for oil blocks primarily serves as a tool for the Congolese government to obtain access to funding and increase its leverage on the international stage. The hosting of the pre-COP27 in the DRC and the US’ recent promise of additional funding for the Congo’s environmental projects and to organise elections show the effectiveness of this. At the same time, however, there remains a possibility – although minor – that oil exploitation actually will take place.