Scramble for oil in DRC and Tanzania?

Eni SpA (E) Wednesday signed a deal with Congo to help search for oil and gas, as companies scramble for its untapped oil. The decision comes as oil company interest is shifting from Nigeria, where unrest has shut down 1 million barrels a day of crude, to underdeveloped basins. In a statement, the Italian oil giant said its Chief Executive Paolo Scaroni signed a cooperation agreement with Congo's Oil Ministry to explore and develop hydrocarbons in a Lakes area thought to be rich in oil and gas.

Eni didn't disclose how much it could invest in Congo, but committed last year to investing $3 billion in the neighboring Republic of Congo, whose capital is Brazzaville. Today, Congo's oil production is small, with 30,000 barrels a day concentrated offshore. Eni is focusing inland, notably in the Great Lakes area. It will look at Lake Tanganyika, the subsoil of which Congo says contains heavy oil.
Joseph Pili Pili Mawezi, head of the Petroleum Projects Department at Congo's Oil Ministry in the capital Kinshasa, told Dow Jones Newswires this could be transported to the Indian Ocean in a pipeline across Tanzania. He said the reservoir could contain 20 billion barrels of oil, 75% of which could be extractable.

Eni will study North Kivu in east Congo. The region's Lake Kivu contains 65 billion cubic meters of methane gas, enough to power the U.S. for a month, the U.N. Environment Program, or UNEP, said in a 2006 report. Mawezi said it was unclear if Eni would prospect within the lake. The methane, formed by bacterial production deposited at the bottom of the lake, needs no drilling to be extracted, Mawezi said, describing it as "like a bottle of fizzy drink." In Africa, critics sometimes accuse hydrocarbon extraction of being exploitative. But Mawezi said at a conference last month that extracting the methane would lift a deadly risk from the 2 million people living on the Lake Kivu coast - it is one of three so-called killer lakes in Africa. The two others, in Cameroon, have already killed locals by suffocation, according to the UNEP report.

Eni said it was committed to use some of the gas it will access in Congo for power generation.On the other side of the lake, U.S. electricity contractor ContourGlobal LP signed a $325 million deal in March with neighboring Rwanda to turn methane into power. Mawezi said that, going forward, the country intends, this fall, to tender oil exploration licenses in or around the Kivu and Tanganyika Lakes. The Eni accord in Congo comes as other oil companies are increasingly attracted by new hydrocarbon basins in Africa, as experts warns global oil resources may become scarce in the next decade.

U.K. oil companies Tullow Oil PLC (TLW.LN) and Heritage Oil PLC (HOIL.LN) have already found oil in the Lake Albert area, in neighboring Uganda. According to data from BP's statistical review, a valued industry source, Africa's oil proven reserves have risen 63% to 125.6 billion barrels in the 10 years to the end of 2008. Eni-operated companies already produce 450,000 barrels of oil equivalent a day in the whole Sub Saharan region.

*Sabrina Cohen in Milan contributed to this report.

Contact the author:
Benoit Faucon,
Dow Jones Newswires;
+44-20-7842-9266;
benoit.faucon@dowjones.com  

Benoit Faucon is a reporter for Dow Jones
+44 77 601 777 36

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