VZCZCXRO7686
RR RUEHMA RUEHPA
DE RUEHMV #0698 2730750
ZNR UUUUU ZZH
R 300750Z SEP 09
FM AMEMBASSY MONROVIA
TO RUEHC/SECSTATE WASHDC 1357
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS MONROVIA 000698 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: ECON ENGR LI
SUBJECT: LIBERIA's OIL PROSPECTS INCREASE FOLLOWING DISCOVERY IN 
NEIGHBORING SIERRA LEONE 
 
¶1.   (SBU) SUMMARY: An oil discovery September 16 at a deepwater 
exploration site in Sierra Leone along the Liberian border increases 
the prospects of unearthing oil along Liberia's geologically similar 
coast.   The highly-publicized find coincides with the National Oil 
Company of Liberia's (NOCAL) solicitation of bids for five separate 
offshore licenses in Liberia.   While the propitious find is likely 
to spark greater interest and higher bids from international oil 
companies, the prospect of vast oil revenues poses challenges as 
well as opportunities for Liberia.   The fact that prospective oil 
funds remain years away provides fiscal watchdogs within the GOL the 
opportunity to implement the ironclad transparency measures that 
will ensure oil revenues translate into widespread social benefit. 
 
¶2. (SBU) Anadarko Petroleum Company discovered 45 net feet of 
hydrocarbon pay in the Venus B-1 well, which sits in two blocks 
along the Sierra Leone-Liberia border.  President of the National 
Oil Company of Liberia (NOCAL) Fodee Kromah told Econoff September 
21 that the Sierra Leone discovery reinforces the pervasive 
conviction that oil lies in Liberia's deepwater, which is 
geologically identical to the Sierra Leonean site. 
 
¶3. (SBU) The timing of Anadarko's find could not be better for 
Liberia.  The Ministry of Lands, Mines, and Energy (MLME) and NOCAL 
announced a third round of bidding for offshore petroleum licenses 
on August 27.  Bidders may submit proposals for exploration of the 
five remaining blocks near the border of Cote d'Ivoire until 
November 30.  Kromah hopes rising regional oil prospects will 
bolster enthusiasm for the five blocks, giving the GOL the upper 
hand in negotiations.  Many companies expressing interest already 
have an ownership stake in Liberia's offshore blocks, among them 
Nigeria's Oranto Petroleum, Australia's Woodside West Africa, and 
Spain's Repsol Exploration. 
 
¶4. (SBU) Anadarko is enjoying the fruits of its first-comer 
advantage, with a stock price that has jumped 50% since March, but 
the largest U.S. oil companies appear reluctant to bid on the 
unexplored blocks.  Chevron Deepwater Exploration and Development 
Manager Mark Krolow downplayed the likelihood of economically viable 
exploration along Liberia's eastern border, given the less favorable 
nature of that basin's geological formations.  Instead, Krolow told 
Econff that Chevron may buy out one of the smaller "promoters" - 
companies that do not explore or bring fields to production - which 
currently own minority interests in many of the acquired western 
blocks. 
 
¶5. (SBU) Media hype may imply oil riches are imminent, but the path 
from exploration to production is a labor, capital, and 
time-intensive process.  If Liberia discovered oil tomorrow, Chevron 
estimates it would take seven years and approximately $6 billion in 
investment before oil production could begin and Liberia would see 
any revenue.  Nevertheless, high and immediate expectations of oil 
revenue are evident: the House of Representatives passed an act 
September 3 to establish a new political capital, offering expected 
future oil revenues as collateral against $10 billion in 
construction costs. 
 
¶6.  (SBU) COMMENT:  While prospective oil riches remain years away, 
the GOL must act soon to implement necessary governance, 
transparency, and social development plans.  To date, the bidding 
process for exploration rights has been surprisingly free of 
corruption, perhaps because there have not yet been proven reserves. 
 As potential returns become more real, there may be pressures on 
the government to provide incentives to legislators to agree to 
concessions, as occurs in other sectors.  The good news is that 
Liberia already requires potential oil revenue to be reported under 
the LEITI process.  With consistent support from international 
partners, and contracts that bind oil companies to socially 
responsible practices, Liberia may be able to follow the example of 
Ghana, escape the problems of Nigeria, and leverage oil revenues for 
the benefit of all its citizens. 
 
THOMAS-GREENFIELD