DR Congo opens oil and gas auction round for carbon credit and crypto groups

The Democratic Republic of Congo will allow carbon credit and cryptocurrency companies to bid in an oil and gas licensing round that has been criticized by environmentalists who say drilling in the country's rainforests and peatlands would risk releasing large amounts of carbon dioxide.

Last month, Congo put 30 oil and gas exploration blocks up for auction. Some of the exploration areas are in Virunga National Park and Cuvette Central, the largest tropical peatland in the world, which naturally absorbs carbon from the atmosphere.

Didier Budimbu, the minister for hydrocarbons, told the Financial Times he would accept offers for exploration rights in rainforests and peatlands from carbon market start-ups that have no ties to oil and gas majors, as long as they have solid financial backing.

Instead of looking for hydrocarbons, such groups propose leaving oil and gas in the ground and instead generating revenue by selling carbon credits to companies that want to offset their emissions.

“If it can help our economy and the country, why not?” Budimbu said. "We're not doing this to destroy the rainforest, we're doing it for economic reasons. . . With or without oil, the main thing is that we make [money]."

Congo produces about 25,000 barrels of crude oil daily from a small number of onshore and offshore blocks along its Atlantic coast. The government's long-held ambitions to develop oil elsewhere in the country have so far been hampered by environmental concerns, corruption and a lack of export opportunities.

Because of these challenges, it remains uncertain how many oil and gas companies plan to participate in the licensing round. France's TotalEnergies, which has a project in neighboring Uganda, and Italy's Eni, which has operations elsewhere in Africa, have both told the FT they will not bid.

Flowcarbon, a startup co-founded by WeWork co-founder Adam Neumann earlier this year, is among the carbon credit groups that have expressed interest.

Phil Fogel, head of cryptocurrencies at Flowcarbon, said the company contributed staff and resources to RedemptionDAO, a campaign organized across messaging platforms Telegram and Discord and launched two days before the auction began in July.

RedemptionDAO aims to purchase at least one of the blocks in partnership with an oil company or through crowdfunding and use it to issue carbon credits for “avoided emissions.” It hopes to raise at least $50 million, but has so far raised just $2.57 million and received $74,000 in commitments, both in USDC, a so-called stablecoin digital currency pegged to the dollar.

Venture capitalist Thomas Annicq said he had contacted the Congolese government separately on behalf of another coalition of carbon market companies that wanted to make a joint bid for the blocks.

Companies have until February to submit offers. However, there is currently no official method for bringing loans from abandoned oil and gas exploration to market, and analysts say a method could take up to two years to develop.

The idea of ​​using loans in this way was first tested 15 years ago, when Ecuador's then-president Rafael Correa called on the international community to compensate the country for not drilling in an oil exploration block in Yasuni National Park. However, drilling continued in 2016 after raising only a fraction of the targeted $3.6 billion.

Multinational companies' reliance on carbon offsets to achieve net-zero targets or to promote their products has created demand for credits for avoided deforestation, making this type of credit a more viable option. Gabon, the world's second most forested country, plans to issue credits for avoided deforestation worth 187 million tons of carbon.

Carbon credit companies typically enter into agreements with local communities or landowners to issue credits.

Ben Rattenbury, head of policy at carbon credit rating start-up Sylvera, said the upfront costs of buying land or exploration rights could create a "catastrophic cash flow problem" for a carbon credit company unless it raises funds through crowdfunding or other means. "I can't imagine a traditional carbon credit developer . . . raising the funds to bid."