After the crisis following the oil counter-shock of 2014-2016, Congo has returned to growth. A favourable economic situation that cannot avoid the need to continue diversifying the economy, which is more essential than ever.
On July 10 and 11 in Pointe-Noire, the best of the Congolese oil industry gathered for a meeting organized by the Franco-British group Perenco and chaired by the Congolese Minister of Hydrocarbons, Jean-Marc Thystère-Tchicaya. At the heart of the discussions at this insider meeting was the estimate of the range of crude oil prices for the second quarter of the year, finally set at $68.5 per barrel, with a differential of 0.3 dollars/barrel. Figures seen by the Minister as « generally positive despite market uncertainties » and which clearly reflect the current recovery of the sector’s activity in Congo. In fact, after the highly productive deposits in the Moho-North field (more than 200,000 barrels/day compared to 100,000 initially expected) came on stream, two new production sharing contracts (PSCs) have been signed since the beginning of the year; the first, in March, with the American Kosmos Energy for the offshore exploration permit for the Marine Block XXI1 and the second, in June, with the Nigerian Pelfaco for the Sounda offshore oil field.
1At a depth of 3,000 metres, the Marine XXI block is the deepest of all the Congo’s offshore deposits.
Resumption of activity
As a result, the country’s daily production, which had fallen to less than 232,000 barrels/day in 2016, could exceed 380,000 barrels/day by the end of this year, according to the Direction générale des hydrocarbures. Much better than the previous peak of 316,000 barrels/day, reached in 2010. Negotiations are also underway with the French company Total for the conclusion of four other CPPs (Marine XX, Nsoko, Nanga 1 and Mokélé-Mbembé). As for the onshore, which has long been neglected, its exploration has increased significantly in recent years, particularly in the Congolese Basin, where the controversial discovery of a major deposit (known as the « Delta de la Cuvette ») was announced in August by two local oil companies, SARPD-Oil (Société africaine de recherche pétrolière et de distribution) and PEPA (Petroleum Exploration & Production Africa). This will compensate for the maturing of other oil fields and, even more so, arouse the interest of new private operators. Like the Divine Inspiration Group of South Africa, the Chinese Wing Wah and China National Offshore Oil Corporation, the Norwegian Coastal Energy and the Russians Gazprom and Lukoil, more and more foreign groups are (re)positioning themselves in this Central African region.
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However, this economic upturn should not make us forget the highly volatile nature of revenues from hydrocarbon extraction, which represent more than half of Congolese GDP and 90% of its export revenues year after year. This is the problem: Congo’s over-reliance on such a cyclothymic activity.
Thus, between 2015 and 2017, at the height of the oil counter-shock, the fall in prices caused a drop in income of more than CFAF 1,400 billion ($2.35 billion), leading to drastic cuts in the State budget and increased precariousness of the population. The World Bank notes that while the proportion of people living below the poverty line fell from 51 per cent to 41 per cent between 2005 and 2011, the extreme poverty rate appears to have increased from 2016 onwards, mainly due to lower oil prices. Moreover, « mining and oil policies based on exports to industrialized countries, without major transformation, do not favour structural effects with the rest of the economy », recalls the United Nations Conference on Trade and Development (UNCTAD), in an evaluation report on Congo2
2« Le contexte de la République du Congo en vue de la mise en œuvre du projet 1415 P, Inès Féviliyé », March 2017.
In order to diversify its sources of income and create the conditions for sustainable and inclusive growth, the Congolese government adopted in July 2018 a National Development Plan (NDP) covering the period 2018-2022, which aims in particular to stimulate non-oil « clusters »: agriculture, forestry, mining, construction, tourism, financial services, etc. In the agricultural sector, Congo has vast areas of uncultivated arable land, representing about a third of its surface area (342,000 km2). The country also has abundant mining resources (iron, copper, gold, potash, uranium…), which are still under-exploited.
Once the diagnosis has been made, the prescribed treatment remains to be applied. In the light of this objective, what assessment can be made of the Congolese government’s action, two and a half years before the expiry of the 2018-2022 NDP? The dynamics of change have undoubtedly been boosted, the most tangible being the development of infrastructure, the cornerstone of economic activity: The sale of former public companies (Régie nationale des palmeraies du Congo, Sangha Palm, etc.) and the granting of vast land concessions to private investors (Olam, Eco-Oil Énergie, etc.) have also strengthened certain sectors, such as cocoa and oil palm.
These are all positive developments, but they are not (yet) significant enough to make a real difference. Thus, despite the diversification efforts launched by the Congolese authorities, agriculture still accounts for only a negligible share of GDP (11%), while the rest of the non-oil private sector continues to suffer from erratic activity, with the construction, transport and telecommunications sectors in particular having recorded a 5.5% decline in their contribution to national income in 2018, according to the World Bank. UNCTAD teams, in the above-mentioned report, note that « private sector activity outside oil still faces a deficit in infrastructure, a difficult business climate and a shallow financial system ». Difficulties in implementation aggravated by Congo’s precarious financial situation: with a public debt equivalent to 88% of GDP in 2018 and strong supervision by international financial institutions on this subject, the country has very little room for manoeuvre to do much more than at present….
However, the need to accelerate the pace of change seems more urgent than ever: after a peak reached in mid-September, following the attack on Saudi oil infrastructure, oil prices have once again returned to a downward trend. They have since sold 15%….
Congo, a petro-dependent country
The Republic of Congo, the third largest oil producer in sub-Saharan Africa (350,000 barrels/day), far behind Nigeria and Angola, has built its economy around black gold, which contributes nearly 80% of the national budget. This production is carried out by a few large international companies, including the Italian ENI, the American Chevron and especially the French Total, which dominates the sector.
A member of the Organization of Petroleum Exporting Countries (OPEC) since June 2018, Congo has two productive basins. The coastal basin in the South, which has been largely offshore and operated since the 1960s, and the Cuvette basin in the North, which is onshore and little exploited until recently. Among these deposits, the most important is the North Moho oil field in the deep sea, nearly 75 km off Pointe-Noire, with a capacity of 200,000 barrels per day. Operated by Total, this project alone covers 60% of total Congolese production.