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The governments of Uganda and the Democratic Republic of the Congo are exploring options for the Congo to join Uganda and Kenya's proposed pipeline project and to serve as an eventual supplier of oil through that pipeline.
The Congo is a minor oil producer, with most of its current production along its western coastline, but the Congo, like Uganda, has been trying for a decade to entice international oil companies to develop its oil resources stranded in the Great Lakes region of Africa. Unlike Uganda, however, development of those resources could re-aggravate century-old hostilities among the local population. Kinshasa has only loose control over the region, and any oil development there will be mired in corruption, smuggling and conflict that will limit the stability of oil flows and the level of investment.
Congo produces about 40,000 barrels of oil per day along its short Atlantic coastline, but perhaps the most promising region for large-scale oil exploration and production is to the east, around Lake Albert. Neighboring Uganda has found some 3 billion barrels of oil reserves just across the border from the area. The extent of the Congo's oil potential in the east is unknown because of the region's remoteness and instability, yet with the discovery of oil in Uganda, producers have begun looking across to the Congo side of Lake Albert in an attempt to capitalize on Uganda's developments and pipeline.
So far there are primarily two oil companies exploring in eastern Congo's three exploration blocks. The most well known is French giant Total, which operates Block III. Total is undertaking preliminary seismic work and studying the block before drilling two exploration wells. The company also is one of the three major operators across the border in Uganda, so it has experience in the region.
Oil of DR Congo, a Congo-focused exploration company set up by Israeli businessman Dan Gertler, is exploring blocks I and II. Oil of DRCongo claims that early seismic exploration suggests their blocks have about 3 billion barrels of oil in place. In fact, although no drilling has begun at any of the blocks, all of the exploration work has been positive so far. With the successful drilling in Uganda — 85 percent of exploration wells have encountered hydrocarbons — the Albertine Graben Basin is a proven hydrocarbon-bearing basin. Pipelines will eventually be built in Uganda to export some of this oil, and it is very likely that should hydrocarbons be found in economical quantities in Congo, the eastern Congo blocks would likely be tied into Uganda's pipeline infrastructure.
The question, however, is whether the local dynamic will be conducive to production. The three blocks are located in the same general area that the Allied Democratic Forces, the Front for Patriotic Resistance in Ituri and the Nationalist and Integrationist Front — all militant groups — have historically been active. These groups are not as active as they once were, but they have slowly been reemerging even without oil production.
Violence in the East
To say that violence is woven into the fabric of life in the eastern Congo would be an understatement. During the 1990s and 2000s, the Ituri district of Orientale province was home to some of the world's worst fighting and frequent humanitarian crises that included figures such as Germain Katanga, Joseph Kony, Thomas Lubanga, Bosco Ntaganda and Jean-Pierre Bemba. The International Criminal Court indicted all five men, and Lubanga and Katanga were the first ever to be convicted and sentenced by the court.
Intervention — whether from the Congolese military, foreign militaries or foreign businesses — has often exacerbated local ethnic conflicts by pitting the interests of one ethnic group against another. For example, during the Second Congo War in the 1990s and 2000s, fighting between the Rwandan, Ugandan and Congolese militaries, among others, often affected local populations in the region and resulted in the creation of local defense militias, or Mai-Mai groups. Some of these groups became relatively robust with the backing of foreign governments.
After a lull, the violence has returned in the past couple of years. In 2013, there were dozens of confrontations between remnants of the Front for Patriotic Resistance in Ituri on one hand and MONUSCO, the U.N. peacekeeping force, and the Congolese army on the other. The Allied Democratic Forces, an exiled Ugandan Islamist militant group, has intensified its actions in the Rwenzori Mountains along the southern border of Total's oil exploration block. Frequent raids and attacks in key trading towns and villages have also attracted the attention of the United Nations' Force Intervention Brigade, which conducted several operations against the Allied Democratic Forces in 2014. Even the Mai-Mai groups are still active. This environment complicates the security picture in the country. MONUSCO's capabilities are already stretched thin, and although the Force Intervention Brigade (FIB) provides some significant offensive capabilities, it does so in only a limited area. (A unit of MONUSCO, the FIB, has a special mandate to conduct offensive operations against certain groups, unlike MONUSCO.) The force can move around but it cannot be everywhere at once.
Back during the militants' heyday, they funded their fight by smuggling gold and other minerals that were mined in the region. The militants also established ties with commanders in the Ugandan, Rwandan and Congolese militaries to help facilitate smuggling operations. However, oil is not a commodity that can be easily smuggled — not only is it difficult to conceal and transport, but there is not much of a market for the unrefined product, unlike Nigeria, where local industry — and illegal and legal refineries — make oil smuggling a lucrative business. Still, we cannot discount the possibility of groups getting involved in the supply chain of the oil industry or harassing workers in the industry. Most important, should rival ethnic groups become more integrated in the industry than others, it will almost certainly lead to more frequent interethnic violence.
Kinshasa will certainly send the Congolese military to guarantee security at oil facilities and operations, but the military has often been seen as an instigator of conflict against the local ethnic groups. None of these groups is able to conduct sophisticated attacks, but they have also never had a desire to do so. It is possible that the introduction of oil pipelines and sites in the area would give them reason to invest the time and resources into developing the capability to carry out attacks.
The View From Kinshasa
The government in Kinshasa — whether led by President Joseph Kabila or someone else — is based on patronage networks through both the military and the political bureaucracy. Like many other countries in the region, patronage is maintained through state finances, and in the Congo's case it is largely done through mining revenue, shady mining concessions and other deals. One of Kabila's greater patrons has been Gertler of Oil of DRCongo. Gertler's holding companies have several mining assets in the Congo, and in the past he has provided much-needed cash to Kabila when the president needed to buy votes or pay patronage, all in exchange for deeply discounted mining deals. Gertler's activity in the Congo's oil sector means that Kabila views the commodity as a way to secure his political future — Kabila needs a constitutional change to run for re-election in 2016.
Kinshasa's stake in various mining projects and the associated benefits, such as forward taxes, primarily fund the government's patronage network. Should any significant amount of oil be produced in the east, it will become a key contributor to those resources. Right now the most lucrative mining exports for Kinshasa are farther south, in Katanga province and the surrounding areas, but oil production could lead Kabila and Kinshasa to focus their attention farther north.
The interest of foreign parties is another complicating element. For historical reasons, the ethnic geography of North Kivu province and Ituri district is more closely linked to Uganda and Rwanda than to Kinshasa. Consequently, Rwandan and Ugandan interests — economic, political and social — in this area are as strong, and in some areas are stronger, than Kinshasa's. Their interventions and backing of armed groups are proof. Oil production in the region will only add complexity — not necessarily stress — to those country's relations.
Still, much of the Congo's vast mineral wealth is located in its east and south, meaning its supply chains run through countries such as Uganda, Rwanda, Tanzania and Zambia — countries with as much ethnic influence there as Kinshasa. The issue could complicate the Congo-Uganda relationship — and Rwanda to a lesser extent — which has been checkered at best. Both sides would have an interest in ensuring that the communal violence remains limited and that oil production is unaffected, but a lot of the regional ethnic interests still have strong ties to the Ugandan military and smuggling operations that run through them.
Kinshasa is well aware that significant oil production could mean another major military conflict in the east. But with that in mind, Kabila will likely shift military resources to the area, seek U.N. assistance or even work with Uganda on establishing a stable foundation that would allow for oil production. The Congolese government also knows that Western companies are more hesitant to go into areas where they know conflict could erupt and have been sensitive to humanitarian conflicts, even if Total is laying the foundation for oil production right now. Ultimately, less trustworthy oil companies will likely do the actual production, such as Kabila's personal network, unless Congo tries to solve the ethnic conflict beforehand.
However, if oil is going to be developed, Kinshasa must be the one to develop it. If not, Kinshasa's struggle to assert superior firepower over subnational rebel groups can be undermined and Kinshasa threatened should these rebel groups mobilize together or receive outside support, especially if newfound hydrocarbons become another enabler and motivator to fight Kinshasa. That there are rebel groups is not necessarily a concern, but there will be increased violence — instigated by Kinshasa moving to assert central control — because Kinshasa cannot tolerate the threat of active rebel groups in proximity to rising hydrocarbons interest. Thus, Congolese dreams of oil production in the east will likely remain muted and will not reach their fullest potential as Congo continues to be challenged by its geographical constraints.
Courtesy : Stratfor (www.stratfor.com)