Innovation in the management of upstream state oil contracts in the Republic of Congo : from transaction to Cooperation for Economic Development

Abstract

This thesis examines the often competitive interests involved in oil contracts and the ensuing strategic dilemmas faced by both the Republic of Congo and international oil companies that operate in that country. Throughout this thesis, we use the Issues-Frameworks-Actions approach to identify, analyze and propose solutions to key problems facing Congo and IOCs. The paper first analyses the historical, legal and institutional background of oil contracting in the Republic of Congo. The production sharing contract (PSC) is the prevailing contractual framework for oil business between the Congolese government and international oil companies (IOCs). The national oil company, SNPC, has received a mandate from the government to act in its name vis-a-vis IOCs. In a second step, the paper develops new analytical frameworks and discusses the strategic challenges posed by the current PSCs to both Congo and IOCs. Multiple levels of information and skills asymmetries challenge Congo's ability to effectively negotiate and implement oil contracts. On the other hand, transforming IOCs into active corporate citizens of Congo would guarantee them contract stability and business sustainability. Finally, against the background of identified problems, the paper makes recommendations as to how Congo and IOCs could address those problems and build lasting partnership. In light of the growing international competition for the African oil and the huge development needs for oil producing countries like Congo, the paper argues that in the best interest of both the IOCs and the host country, oil contracts should evolve from simple transactions to long term cooperation tools that address each side's expectations and needs. The thesis indeed supports the idea of shifting the contract focus from the traditional oil profit split and government take to broader value creation in the host country.