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 
 
¶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