The Democratic Republic of Congo (DRC) is considered to hold considerable crude oil reserves - perhaps 6% of the entire African continent’s reserves. However, the DRC’s crude oil production has plateaued at the very modest level of around 25,000 barrels per day for the last fifty years. Thus, the DRC oil and gas sector has significant development potential and the country could see an important increase in its GDP if it succeeds in implementing an environment that is favourable to attracting major investment. One important development is the recent modernisation of the oil and gas legislative framework.
After several years of deliberations on the reform of oil and gas legislation, the DRC adopted Law n°15/012 dated 1 August 2015 establishing a general regime for hydrocarbons (the Hydrocarbons Law). The legislative reform process was recently concluded by the adoption of Decree n°16/010 dated 19 April 2016 establishing hydrocarbons regulations (the Regulations), which, among other things, adds more details to the applicable fiscal regime.
Our briefing New O&G legislation in the DRC summarises the main provisions of the new Hydrocarbons Law and Regulations relevant to oil companies engaged in upstream activities.
The new hydrocarbons legislation sets out a relatively straightforward and very detailed framework for upstream oil and gas rights. While the level of detail is useful in giving international investors a fairly accurate view of their rights and obligations, it does leave little space for negotiation or for agreeing on a tailor-made regime when the particular project justifies it. In addition, the fiscal and state participation provisions are more onerous than in several neighbouring countries and may be subject to future adverse changes due to the absence of any stabilization clauses. Oil companies interested in upstream investments in the DRC should carefully craft approaches that will maximize the advantages of the recent reforms and minimize their disadvantages.