Rep. of Congo: The deal between Soco and another oil company breaches Congolese law and makes no commercial sense, says Global Witness; the company rejects the allegations
Author: Global Witness, Published on: 18 February 2019
"London-listed oil company SOCO dumps Republic of Congo asset under highly questionable circumstances", 15 February 2019
...SOCO International Plc disposed of one of its last Sub-Saharan Africa assets in a deal that breaches Congolese law and appears to make no commercial sense, a new Global Witness investigation reveals. On 25 June 2018, SOCO announced it had signed and completed an agreement to sell a subsidiary holding its operating stake in Congo’s Marine XI offshore oil block to an opaque shell company with no prior experience, cash or assets called Coastal Energy Congo. SOCO failed to inform or seek authorisation from the Congo’s oil authorities prior to the sale, in breach of Congolese law. It announced completion of the transaction without receiving any money and had at least one better offer, which it declined. Payment for the asset was conditional on certain terms, which ran an eighty to ninety-eight per cent chance of failure, the company reported shortly after the transaction. Coastal, incorporated just weeks before the deal in the secretive Marshall Islands, promptly installed a close relative of Congolese president Denis Sassou Nguesso to manage its local business, and started to transfer payments to at least one company connected to its CEO...
Overnight, the Congolese government found an empty shell company responsible for running one of its prime untapped oil blocks, and SOCO’s shareholders found themselves an asset short with nothing concrete to show for it. A few months after the deal was announced, Congo’s oil authorities commissioned a formal inquiry to establish whether Coastal had the technical and financial capacity to operate the block. The conclusion was negative...
“Congo is Sub-Saharan Africa’s third largest oil producer, yet as the country seeks its second bailout in less than a decade the revenues from this lucrative but finite resource do not appear to be making it into state coffers,” said White. “It is crucial – in this context more than ever – that the country’s remaining reserves are managed and exploited in a responsible manner. Foreign oil companies must adopt the highest standards in doing so and those that do not must be held to account.”
SOCO “strongly rejects” any allegation that it has been “less than transparent and legally compliant in its handling of the transaction” with Coastal, and Coastal “strongly denies” any allegations of corruption relating to the deal.
Congolese law and appears to make no commercial sense, a new Global Witness investigation reveals.
Related companies: SOCO International