Production share dispute linked to Rwanda oil deal collapse

Saturday February 1 2014

A gas extraction barge on the shores of Lake Kivu in Karongi District, Western Province. Photo/Cyril Ndegeya

A gas extraction barge on the shores of Lake Kivu in Karongi District, Western Province. Photo/Cyril Ndegeya 

By ALEX NGARAMBE Rwanda Today

An oil exploration deal reportedly collapsed after a foreign company demanded a 80 per cent share once oil was discovered in the Kivu belt, which the government rejected.

The Canadian oil and gas company has invested in oil exploration in the Lake Kivu region for the past seven years but the alleged disagreement is said to have led to the amicable cancellation of the deal between the two parties.

Rwanda Development Board (RDB) is the chief negotiator for the exploration of oil in the region, which borders Democratic Republic of Congo (DRC), and with the cancellation of the deal with Vanoil, plans are under way to contract new companies to proceed with the exploration works.

Details of the share the government had demanded were not clear as we went to press, although the collapse of the deal was partly premised on a dispute arising from the sharing of the spoils.

“We have settled our differences amicably and out of court in regard to the oil exploration deal,” said Cabinet Minister Valentine Rugwabiza, the chief executive officer of RDB.

RDB tight-lipped

RDB was however tight-lipped about the details of production sharing agreements with the Canadian company.

“We can’t give details of what transpired between us and Vanoil,” added Ms Rugwabiza.

Rwanda is hopeful of discovering the oil in the Kivu, given the similarity in the region’s geographic and geological features with the albertine region of Uganda where huge deposits the resource have been discovered.

According to the exploration law, even if a mining firm invests huge sums of money in prospecting and no minerals are found, it is not compensated for the effort.

Demand lion’s share

This is being seen as the reason that could have motivated Vanoil to demand the lion’s share in the agreement since it had sunk huge chunks of money in the exploration.

Last week, a Vancouver-based Canadian international oil and gas development company announced that Vanoil and Rwanda had agreed to end their discussions regarding the exploration of Lake Kivu in Rwanda following expiry of the Technical Evaluation Agreement (TEA) between them in June 2013.

As part of this agreement, the government and Vanoil amicably resolved the issues referred to in the Conciliation Committee under the TEA, it added.

Vanoil has a portfolio of assets in East Africa and the Seychelles islands in the western Indian Ocean.

It was also alleged that Vanoil was locked in a dispute with the government over the ownership of its assets.

In an interview with a Canadian newspaper, the Province, last year, Vanoil director Don Padgett accused the government of not facilitating foreign investors who opt to invest in Rwanda.