ERITREA'S PRECARIOUS ENERGY SITUATION

C O N F I D E N T I A L SECTION 01 OF 02 ASMARA 000558 SIPDIS DEPARTMENT FOR AF/E; LONDON AND PARIS FOR AFRICA WATCHERS E.O. 12958: DECL: 11/14/2018 TAGS: ECON ENRG PGOV ER SUBJECT: ERITREA'S PRECARIOUS ENERGY SITUATION REFS: A. A. ASMARA 000362 ¶B. B. ASMARA 000300 ASMARA 00000558 001.2 OF 002 Classified By: Ambassador Ronald K. McMullen for reason 1.4(d) ¶1. (C) SUMMARY: Eritrea's electrical grid narrowly averted a complete shutdown due to lack of generator lubricant in October, according to Total Oil's country manager. The Eritrean government is still in arrears on payments made for fuel delivered in December 2007, and is now receiving all of its fuel imports overland from Sudan. Foreign-owned fuel companies are frustrated with doing business in Eritrea, and are considering closing operations in 2009. END SUMMARY. ELECTRICAL GRID ONE DAY FROM TOTAL SHUTDOWN -------------- ¶2. (C) Mohammed Gbepo, a Ghanian who is the country manager for Total Oil in Eritrea, told Emboffs that Eritrea was only one day from a complete shutdown of its electrical grid on an unspecified day in October. Eritrea's four diesel-fired electrical generators in Hirgigo (outside Massawa) burn ten to fifteen barrels of specially formulated lubricant per day. In October, the Eritrean Electrical Corporation (EEC) informed Total that lubricant stocks had dropped to only a ten days's supply, and requested an expensive emergency air lift of 720 barrels from France to replenish their supplies. Without these supplies, the EEC would be forced to shut down Hirgigo's generators. ¶3. (C) Gbepo said said the GSE could not pay the high price (approximately US$ 1,270 per barrel) up-front for the airfreight. Within a few days, however, he did find a div r ible source iQ Qhe region and had the lubricant shipped to Eritrea's port of Massawa. Gbepo said had the shipment arrived 24 hours later, Eritrea's entire electrical grid would have shut down. The EEC experienced problems maintaining necessary lubricant supplies throughout 2008 (Ref A),but this situation was by far the most precarious. Gbepo noted not a single Eritrean official thanked him for the extra effort. ¶4. (C) Total will send 650 barrels of lubricant (about six week's supply) to Eritrea on December 5, but the shipment will not be delivered until Total receives advance payment. Gbepo expects the GSE to make the payment, and for the lubricant to be delivered on time. THE DEADBEAT GSE & NEW SOURCES OF FUEL -------------- ¶5. (C) The GSE has yet to pay its Kuwaiti supplier for a shipment of fuel received in December 2007 (Ref B),according to Gbepo. He added that a fuel barge scheduled to resupply Eritrea on July 21 (Ref A) never entered Massawa. While the barge waited offshore outside Eritrean waters, the fuel supplier demanded advance payment for the fuel. When the GSE could not pay, the barge then diverted to another (unspecified) destination. ¶6. (C) Since July, Eritrea has relied exclusively on overland fuel imports from Sudan. Gbepo said the import operation is run by Eritrean Defense Force (EDF) officers, who siphon off a significant percentage of the fuel before it reaches its final destination. The tanker trucks never unload their fuel into a depot or other storage facility, but instead proceed directly to their final customers for delivery. ¶7. (C) Gbepo also said that he didn't believe Sudan produced the type of heavy fuel oil needed by the Hirgigo generators. He said that the generators were probably converted to use more expensive automotive diesel. TOTAL MAY CLOSE OPERATIONS IN 2009 -------------- ¶8. (C) Gbepo expressed frustration working in Eritrea, anda aaid he may clisi Total's operations in 2009. For example, the GSE ordered Total to remove (at Total's expense) a fuel pipeline running from an inland bunker in the port of Assab to the docks, supposedly to make way for a fresh water line. Total also holds approximately $27 million dollars of ASMARA 00000558 002.2 OF 002 worthless local currency that the GSE will not allow it to convert or repatriate. Neither Gbepo nor his headquarters supervisors believe the GSE will relax its arbitrary and heavy-handed business practices in the near future. Gbepo added that Libyan-owned Tamoil (the only other foreign-based fuel company in Eritrea) is experiencing similar frustrations, and may also close its operations in 2009. ¶9. (C) COMMENT: The GSE cannot rely indefinitely on the goodwill of foreign companies to bail it out of difficult situations. While the GSE has been able to keep some fuel available in-country and the lights on, its fuel reserves at the end of 2008 seem to be much lower than they were at the beginning of the year. The GSE's forced reliance on just-in-time fuel deliveries from Sudan indicates a lack of a strategic reserve, leaving the country susceptible to a major supply shock if deliveries from Sudan are interrupted. ¶10. MINIMIZE CONSIDERED. MCMULLEN