OIL SHORTAGE HITS LIBERIA

UNCLAS SECTION 01 OF 02 MONROVIA 000136

SIPDIS

E.O. 12958: N/A
TAGS: ASEC ECON ENRG LI
SUBJECT: OIL SHORTAGE HITS LIBERIA

REF: 09 MONROVIA 662


1. (SBU) SUMMARY: Oil importers were forced to impose rations
January 15 and gas stations temporarily shut down January 24, after
an oil refinery in Cote d'Ivoire that supplies the majority of
Liberia's oil unexpectedly malfunctioned and ceased exports. The
state-owned Liberia Petroleum Refining Company (LPRC) maintains
strategic reserves, but its storage infrastructure is so limited
that emergency stockpiles of oil, diesel and kerosene were depleted
within a week. Imports from alternative refineries in Europe and
South Africa have resumed, but supply lines will remain precarious
until the Ivorian refinery restarts operations April 30. That a
single technical glitch could disrupt fuel delivery in a country
that depends upon oil imports for all electrification and business
operations underscores the limitations on Liberia's infrastructure,
the absence of emergency preparedness procedures, and the weakness
of an undiversified reliance upon foreign oil. The development of
domestic renewable energy sources is the only assurance of
Liberia's long-term energy security. END SUMMARY.




2. (SBU) T. Nelson Williams, Acting Managing Director of the LPRC,
explained that on January 1, the Refining Corporation of Cote
d'Ivoire, where Liberia's nine oil importers purchase 90 percent of
their fuel, informed the LPRC that it had suffered unexpected
systems failure and could not deliver a promised shipment. The
LPRC, a state-owned enterprise that manages the oil jetty and tank
farm where importers store gas, diesel fuel and kerosene, sold fuel
to importers from its modest strategic reserves while importers
commissioned new supplies from refineries in Spain and South
Africa. As stocks depleted, importers began rationing sales to
consumers. On January 15, Total Liberia, the owner of the majority
of gas stations in Monrovia, limited sales to USD 10 per customer.
On January 24, Total closed its seven stations until late
afternoon, when it could finally replenish stocks. In fact, the
LPRC received its first alternate shipment from Spain January 20,
but a pipe at Liberia's 1950's-era oil jetty suffered a chronic
rupture, which delayed offloading until January 24. Fortunately,
Liberia averted a shortage of diesel fuel (and ensured that
electricity remained running) because several shipments from Europe
arrived in early January. Diesel importers have since secured
additional long-term contracts with European suppliers through
April 30.




3. (SBU) Walter Brudermann, marketing manager at Total, observed
that Liberia suffers from an undiversified supply chain, a
dilapidated oil jetty, and insufficient strategic reserves, all of
which imperil continuous fuel delivery. In a country that relies
upon diesel fuel imports for all electricity, Brudermann warned
that a longer delay in imports could cripple businesses and plunge
Monrovia into the dark.




4. (SBU) Williams acknowledged the shortcomings in the LPRC
infrastructure and emphasized the urgent need to invest in
facilities to ensure oil imports. He said the LPRC will begin
negotiations this month with UK-based Motherwell Bridge to renovate
both the tank farm and the oil jetty, at a cost of USD 22.4 million
and USD 10 million, respectively. After HIPC Completion Point, he
anticipates the LPRC will be able to finance the projects from
future revenues, with only minimal recourse to borrowing. With the
new tank farm, the LPRC's strategic reserves will increase from 30
days to six months. Further, in anticipation of a donor-funded 10
Megawatt generator run on heavy fuel oil that is expected to come
online this year, the LPRC will add a fourth pipe for heavy fuel
oil.




5. (SBU) COMMENT: It appears that the shortages are for technical
reasons, and not financial. While the state-owned LPRC controls
the import of petroleum products, the products are purchased by
private entities at market prices. However, that a series of minor
misfortunes -- a disrupted supply line, a leaky pipe -- could
disrupt all fuel delivery underscores the fragility of Liberia's
energy security and the shortcomings of reliance upon imported
fuel. Diesel-powered generators remain the only source of
electrification in Liberia. Even in the medium-term, donor and
private investor plans to provide heavy fuel oil facilities to
power Monrovia's nascent electricity grid could be constrained by
the absence of an HFO pipeline at the LPRC. Further, the LPRC may
prove unable to implement its optimistic renovation plans, given
the state-owned enterprise's track record of mismanagement and

MONROVIA 00000136 002 OF 002


fiscal profligacy. LPRC's efforts to bring in a sole-source
bidder, Zakhem International Construction, to refurbish the jetty
have been mired in legal wrangling and accusations of corruption,
leading to the departure of LPRC head Harry Greaves (reftel).
While the LPRC and oil importers seem to have cobbled together a
short-term solution, the recent energy shortage reinforces the
importance of a comprehensive energy policy that incorporates
domestic, renewable fuel sources and relies less upon imported oil.
ROBINSON