By Sonia Rolley
(Reuters) – A Canadian start-up run from a private home was chosen by Democratic Republic of Congo for a technically complex project to extract methane from the deep waters of a volatile lake, despite the company not meeting the tender’s financial criteria, documents seen by Reuters show.
President Felix Tshisekedi, who is seeking re-election in December, has promised to shake off Congo’s reputation for opaque dealings as he pushes plans to develop dozens of oil and gas blocks – many of them in environmentally sensitive areas.
First to be auctioned were three methane blocks in Lake Kivu, sometimes dubbed a “killer lake” because of a risk of deadly eruption. The extraction project aims to supply gas for power generation, including to hundreds of thousands of people living on the lake’s shores.
The auction, which took place last year, was the first of its kind to be conducted in Congo under a law from 2015 that was designed to promote transparency in the oil and gas sector.
Canada-based Alfajiri Energy Corporation was included in the auction although an evaluation report produced by a government-appointed commission in October 2022 found the company did not meet minimum financial requirements.
The report, along with two others, was obtained by Reuters in collaboration with the Bureau of Investigative Journalism, a non-profit news organisation. Reuters also independently interviewed three sources directly involved in the auction.
Additionally, a technical report assessing the bid, dated Dec. 8 2022, appeared to have been altered in Alfajiri’s favour, according to the documents and the sources. The documents do not show why Alfajiri was included in the auction, who requested that the report be edited, or why.
Hydrocarbons Minister Didier Budimbu denied any problems with the tender process in an emailed response to questions from Reuters.
“The process was very transparent and it will remain so. I will make sure of it,” he said in an earlier text message exchange.
Tshisekedi’s office declined to comment, saying any questions about the auction should be directed to Budimbu.
In a written reply on Oct. 23, Alfajiri’s founder and chief executive Christian Hamuli called the process “rigorous, transparent and credible.”
Congo-born Hamuli registered Alfajiri Energy Corporation on January 10, 2022, three weeks after plans for the auction were first announced, using the address of his home in Calgary, Canada’s company registry shows.
The hydrocarbons ministry’s call for expressions of interest in the project spelt out a clear stipulation, only companies with three years of financial records would be considered suitable, a requirement that reflected a clause in Congo’s new oil and gas regulations.
Specifically, articles 66 and 67 of the regulations say offers will be rejected if they do not meet certain conditions including “the presentation of balance sheets and statements from the last three financial years.”
FIRST HURDLE
The first hurdle to clear was the pre-selection stage where a panel of government oil sector officials and technical experts evaluated the suitability of the companies competing for the three blocks.
Having only existed for a few months, Alfajiri failed to produce the required financial records, according to the eight-page, Oct. 22 report from the committee. It showed the three rival applicants for the Lwandjofu block met the requirement.
Joseph Nzau was a lawyer for the ministry when the regulations governing the sector were drafted. He said the financial history requirement was created after several companies that signed previous oil and gas contracts ended up lacking the means to execute projects.
“The rule is clear. A company applying for pre-selection must provide proof of its accounts and balance sheets for the past three years,” he said. He declined to comment on the merits of individual companies.
In his response to Reuters, Minister Budimbu denied Alfajiri’s lack of financial records should have disqualified it in the pre-selection phase, saying this amounted to a misinterpretation of the law.
Budimbu was responsible for organising the auction to find suitable operators. He was also in charge of forming the panel that drew up the bid assessment reports and passing the panel’s conclusions to the council of ministers, which approved the winner based on the recommendations.
He said Alfajiri scored highly enough to make it through the pre-selection stage despite its lack of paperwork.
Alfajiri’s Hamuli did not directly address questions about the lack of required financial records in Alfajiri’s bid. Alfajiri has “highly qualified and experienced professionals with integrity capable of developing the project in a secure
manner,” he said.
The ministry has not announced the size of the investment in the blocks, how the project will be financed, or production goals.
“KILLER LAKE”
Lake Kivu lies in the Rift Valley on Congo’s eastern border with Rwanda. Dissolved at great pressure in water hundreds of meters down near the lake’s bed are large methane reserves and even greater quantities of carbon dioxide.
Lake Kivu is one of three lakes in Africa scientists say are at risk of limnic eruption.
Extracting methane from Lake Kivu, located in one of Africa’s most heavily populated areas, could provide power to some of the 80% of Congolese who have no access to electricity, and potentially reduce the risks from the lake, the Congolese government and experts say.
However, some scientists, including vulcanologist Dario Tedesco, say failure to properly reinject water and by-products could increase the chances of eruptions of carbon dioxide and poisonous hydrogen sulfide, pollute the lake bottom and alter its delicate chemical and physical balance.
MOVING ON
Despite its lack of financial history, Alfajiri advanced in the process, and its bid for the Lwandjofu block was assessed alongside those of U.S. firm Winds Exploration and Production and Congolese-Lebanese firm Ray Group.
Alfajiri’s bid performed badly on several criteria at this stage, and a report from the panel dated Dec. 8, 2022 showed it received the lowest suitability score among the three bidders.
Of the three submissions, Alfajiri initially received the lowest score – a total of 30.7 points out of a possible 100 – on a scale that assessed how well the bids met financial and technical criteria including their proposed partnership terms with Congo, work plan, and the qualifications of key personnel.
Of that score, it received just two of a possible 30 points in the financial portion of the assessment and 28.7 out of 70 points in the technical portion.
Alfajiri failed to demonstrate it employed qualified staff, had not submitted a feasibility study or a timetable for the project and “had not taken account of public safety issues,” the report said.
Winds scored the highest of the three bidders, with 53.8 points, the report shows.
But then, an edited version of the report put Alfajiri in first place, the documents show.
The report’s second version – also dated Dec. 8 and seen by Reuters – raised Alfajiri’s score to 55.75, putting it ahead of Winds.
In his response, Budimbu told Reuters the only version of the final report that mattered, and that he had received, was the one in which Alfajiri was awarded the highest score.
Although it gave a higher score, the final report added a number of concerns to the earlier version, including comments that Alfajiri had proposed insufficient financing for requisite state bonuses and social projects.
Reuters was unable to establish the motive for the new scores in the second report.
Asked if he was aware about any irregular change to the results, Frank Ihekwoaba, chief executive of Winds said “we heard rumours” but had not wanted to escalate it to avoid souring relations with the government. He said the process seemed rigorous for Winds, which won another of the three blocks.
Ray Group did not respond to Reuters’ request for comment.
Hamuli did not directly respond to Reuters’ questions about the changes in the report that led to it winning the block.
Regarding Alfajiri’s suitability for the project, he said Alfajiri was a start-up that would use a better extraction method than competitors, without giving further details on this method.
“I am very proud and confident of our team’s ability to bring the project to fruition,” Hamuli said by text message in September.
(Writing by Alessandra Prentice and Bate Felix; Editing by Joe Bavier and Frank Jack Daniel)
