Identifier
Created
Classification
Origin
09MONROVIA186
2009-03-10 11:59:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Monrovia
Cable title:  

LIBERIA: AMBASSADOR TOURS RECOVERING LIBERIA PETROLEUM

Tags:  EPET EWWT ECON EINV PGOV LI 
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VZCZCXRO5048
RR RUEHMA RUEHPA
DE RUEHMV #0186/01 0691159
ZNR UUUUU ZZH
R 101159Z MAR 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 0863
INFO RUEHZK/ECOWAS COLLECTIVE
RUEATRA/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RHEHAAA/NSC WASHDC
UNCLAS SECTION 01 OF 02 MONROVIA 000186 

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: EPET EWWT ECON EINV PGOV LI
SUBJECT: LIBERIA: AMBASSADOR TOURS RECOVERING LIBERIA PETROLEUM

REFINING COMPANY

UNCLAS SECTION 01 OF 02 MONROVIA 000186

SENSITIVE
SIPDIS

E.O.12958: N/A
TAGS: EPET EWWT ECON EINV PGOV LI
SUBJECT: LIBERIA: AMBASSADOR TOURS RECOVERING LIBERIA PETROLEUM

REFINING COMPANY


1. (U) SUMMARY: Liberia Petroleum Refining Company (LPRC) Managing
Director Harry Greaves outlined an ambitious strategic development
plan during the Ambassador's tour of LPRC facilities on February 23.
The state-owned petroleum import and storage monopoly has undergone
impressive financial and operational improvements under Greaves'
leadership since 2006. At present, LPRC operations are limited by
decayed infrastructure and HIPC restrictions on debt financing for
any improvements, but Greaves hopes to move quickly on $25 million
in facility upgrades and eventually privatize LPRC to raise enough
capital to build a 50,000 barrels-per-day (bpd) refining facility in
Buchanan. END SUMMARY.


2. (U) The Liberia Petroleum Refining Company (LPRC) is a
state-owned enterprise (SOE) responsible for the importation,
storage and marketing of petroleum products to Liberia (Note: LPRC
has not operated as a refinery for over 20 years.) The Managing
Director is appointed by a Board of Directors and approved by the
President. LPRC's monopoly profits have provided prior governments
with an irresistible source of funds for off-budget (and often
private) projects. But responsible financial management (supported
by GEMAP) since 2005 has reduced the leakages and resulted in a
dramatic increase in cash holdings; LPRC now has over $8 million in
the bank.


3. (U) However, after two decades of civil conflict, mismanagement
and neglect, LPRC facilities are in a serious state of disrepair.
The oil jetty that serves as the country's sole petroleum lifeline
is corroded and exposed; leaky and obsolete infrastructure leads to
high losses and environmental hazards; storage capacity is limited
to a few dangerous and dilapidated tanks; and fire fighting and
security capability is inadequate. LPRC contracted Canadian
petroleum consultants William G. Matthews Associates in 2006 to
conduct an assessment of terminal facilities, perform a market study
to determine storage needs through 2013, and estimate costs to build
new storage and rehabilitate necessary facilities. Based on the
assessment, LPRC conducted a competitive tender for the estimated

$25 million rehabilitation project and selected Polish firm Zachem
as the winner in early 2009.


4. (U) In order to move forward, however, LPRC must find a way to
fund the repair contract that does not violate HIPC prohibitions on
debt financing. LPRC is circulating a proposal under which a new
"terminal rehabilitation fee" of USD 0.15 per gallon would be
collected from fuel importers and deposited directly into an escrow
account used solely as a source of funding for the product storage
terminal rehabilitation. (Note: the current USD 0.20 per gallon
storage charge would concurrently decrease by USD 0.05 to USD 0.15
per gallon resulting in a net USD 0.10 increase to end users. End
note.) An independent expert to be retained by LPRC to monitor the
rehabilitation program would review, evaluate and approve all escrow
account disbursements. Greaves explained that this "Contributions
in Aid of Construction" scheme allows for the financing to be
reflected as a reduction in receivables rather than as a liability
on its balance sheet.


5. (U) Beyond the urgent upgrades needed to bring the LPRC up to
minimum storage capability, Greaves also has a longer-term proposal
to scrap the 15,000 barrels per day (bpd) Gardnersville refinery
(defunct since 1983) and build a new 50,000 bpd refinery in Buchanan
that would retain 80% output capacity for export. Greaves told the
Ambassador this refinery would increase fuel security, prepare for
potential offshore production, and establish Liberia as a petroleum
transshipment point. In order to raise the estimated $500 million
for the project, Greaves is suggesting that LPRC sell shares to
strategic partners and eventually carry out an initial public
offering to enable institutions and individuals to acquire stake in
national asset and thereby transform LPRC from a state-owned
enterprise into a corporation owned by the Liberian public.

BACKGROUND
--------------


6. (U) In 1968 the Liberian Refinery Company (LRC),jointly owned
by Dynalectron Corporation (now Dyncorps) and Sun Oil Company (now
Sunoco),completed the construction of a refinery in Gardnersville.
In 1978 Sun Oil and Dynalectron relinquished their equity stake and
the GOL formed the LPRC as a state-owned limited liability company
to acquire the assets of the LRC (Note: President Sirleaf,
then-Deputy Minister of Finance for Revenue, led the incorporation
of LPRC into the GOL. End note.) In 1983 a consortium of banks
withdrew their line of credit which caused LPRC to cease refining
operations and forced the GOL to begin importing all refined
petroleum products through the port of Monrovia. In 1989, an Act of
Legislature gave LPRC monopoly rights over the importation and
distribution of all petroleum products. In 1998 the Taylor
government created an importation and distribution monopoly for
Galaxy (later called West Oil Investments) and LPRC was relegated to

MONROVIA 00000186 002 OF 002


the role of a storage terminal. In 2003, the National Transitional
Government of Liberia (NTGL) required LPRC to issue import licenses
to a minimum of three companies, but financial mismanagement
prevented the GOL from realizing any of these efficiency gains. By
Jan 2006, new Board and management took over and inherited debts of
US$2.2 million and only $50,000 in bank.


7. (U) Under the Sirleaf administration and the leadership of Harry
Greaves, LPRC was one of the first SOEs to carry out a rightsizing
exercise, reducing staff from 650 to 235 and senior positions from
16 to 6. With assistance from the Governance and Economic
Management Assistance Program (GEMAP),LPRC introduced new financial
management controls, including the preparation of monthly financial
statements for review by the Board of Directors and annual audits by
a reputable international auditing firm. LPRC's financial position
strengthened dramatically: annual net income rose from roughly $1.5
million in 2005 to over $5 million in 2008 and LPRC has almost $8
million in the bank in addition to payments of $2.5 million in
dividends and taxes to the GOL since 2006. By 2008, the number of
importers has risen to nine and as a result of the increased
competition and improved financial management, petroleum prices in
Liberia are amongst the lowest in the ECOWAS Region.

BIOGRAPHY
--------------


8. (SBU) Harry Greaves was educated in England and the United
States and later served as Vice President of Finance at the Dallas
Morning News and as a Senior Finance Officer with the Washington
Post. He has been an associate of President Sirleaf since the
1970s. He is reported to have been a planner of the failed coup
attempt in 1985. He was a vocal member of the U.S.-based
Association for Democratic Change in Liberia, a group that supported
Taylor in his early efforts to take power, and a founding member of
the Liberia People's Party (LPP). In 2003 he returned to Liberia
and joined the Liberia Action Party (LAP) led by former president of
the National Transitional Government Gyude Bryant. He was appointed
by Bryant as an Economic Advisor, a position he resigned shortly
before the election to join the Sirleaf campaign. His wife,
Precious, owns and operates a popular U.S.-themed restaurant.

COMMENT
--------------


9. (SBU) The LPRC is one of the few GOL agencies with management
that thinks and plans strategically. While previous management
teams have concentrated on squeezing LPRC for short term gains at
the expense of longer term development, Greaves has strengthened the
organization with an eye on future growth. Indeed, one of his
biggest challenges at present is to protect LPRC's hard-won gains
from pressure from the GOL to increase dividend payments. Greaves'
tenure has not been without acrimony - he is often vilified in the
press for his role in the NTGL and a murky contract between the LPRC
and Nigerian firm Addax Ltd. related to an October 2006 concession
between the GOL and GON for crude oil. Greaves' record of
transparency has been strong, however, and the LPRC is one of the
few SOEs that produces regular Annual Reports that are audited by
independent accountants. As a result, LPRC is likely one of the top
candidates for privatization by a government that looks favorably on
public-private partnerships.

THOMAS-GREENFIELD