HEADED FOR MERGER?
Plans are apparently underway to integrate the National Oil Company of Liberia (NOCAL) with the Liberian Petroleum Refinery Corporation(LPRC) . The plan, FrontPageAfrica has learned would see LPRC becoming a downstream division of NOCAL headed by a vice president and could possibly be implemented as early as the end of this year or first quarter of next year. What would this mean for the current structure of Liberia’s refinery?
Rodney D. Sieh, rsieh@FrontPageAfricaonline.com
ddressing the first-ever mining conference in Monrovia last week, Christopher Neyor, President and Chief Executive Officer of the National Oil Company(NOCAL) made public what has been in the pipeline for some time, a purported plan to integrate NOCAL with the Liberia Petroleum Refinery Corporation(LPRC).
Since Neyor’s declaration, heads have been turning over the plan still short on details and not pinned down on timing. “It is something the government has been pondering for sometime,” but it has not been set on timing,” says Harry Greaves, former Managing Director of LPRC, who is believed to have drafted the proposal for the plan yet to be put into action.
The plan is one of four immediate objectives of the recently-appointed Neyor, who succeeded Dr. Foday Kromah, in the aftermath of President Ellen Johnson-Sirleaf’s decision to send her entire Cabinet on Administrative Leave last year.
Besides the planned merger, Neyor also plans to review the Petroleum Law and the NOCAL Act, draft a New Petroleum Law and Amend the Act Establishing NOCAL as well as put in place training & Capacity Development Strategy.
Section 4 of the current NOCAL Act gives the oil company the right, title and interest of the Republic of Liberia in the deposits and reserves of liquid and gaseous hydrocarbons within the territorial limits of the Republic of Liberia, whether potential, proven, or actual with the aim of facilitating n the development of the oil and gas industry in the Republic of Liberia.
For Neyor, the intent as per the national energy policy is to have a fully integrated oil with both upstream (exploration and production) and downstream(refining and distribution) operations in accordance with international best practice.
Neyor says NOCAL already has statutory rights for both upstream and downstream and that LPRC would become downstream division of NOCAL headed by a vice president. “We are looking at implementation time of hopefully by the end of this year or first quarter of next year,” says Neyor.
It is unclear how the plan will be implemented and what would become of the current structure at LPRC and NOCAL but another source suggested that the plan coming to fruition in an election may not be feasible and could very well be implement some time in 2012 or later. Sources have hinted to FrontPageAfrica that the position of vice president for petroleum would most likely go to the current LPRC boss T. Nelson Williams, with Neyor maintaining his position as overall head of the merged entities. Ironically, the first president of NOCAL, Belle Dunbar was also the Managing Director of LPRC. A former aide to Dunbar explains that it was set up that way intentionally and done to create uniformity between the two programs.
Since reports of the merger plan became public, reactions have been mixed with some skeptical about the plan while others have raised questions about the timing and motives behind such an aggressive undertaking. But Neyor explains that there are some who don’t understand functioning of state oil companies and the value they bring from integrated upstream and downstream operations and have already started criticizing what they don’t’ know.
As debate over the merger lingers, FrontPageAfrica has learned that the idea of NOCAL absorbing LPRC has always been the intention from the inception of NOCAL. But the sole reason for the delay in its implemented when NOCAL was created was because LPRC was an established entity with a tremendous amount of revenue generation while NOCAL was in its infancy stage of creation with no revenue, thus lacking the ability to effectively house LPRC.
Eyeing short-term revenue
The futuristic goal was to strengthening NOCAL by proving that Liberia had commercial quantities of off-shore oil, create the requisite model partnership agreements and revising the existing petroleum laws to attract reputable development partners. The goal also entails generating short and long term revenue streams were all paramount before an amalgamation could take place and a national energy policy that fosters consistency, accord, compliance and fluidity between the Upstream and Downstream hydrocarbon programs - administered by a singular and unison decision making body - is vital to the effectiveness and success of Liberia's petroleum sector. The extraction sector (Upstream) is usually the umbrella that houses every other aspect of hydrocarbon development, including the refinery of crude product.
While NOCAL has authority over LPRC, the purported merger still faces complications and requires legislative backing before it can come into play although Section 8 of the NOCAL Act gives the NOCAL board powers to make, approve, alter, amend and repeal the By-laws of the Corporation.
For now, it remains unclear what the planned merger would do for the functions and structuring of LPRC which currently is responsible for the holding of all of the rights, title and interest of the Republic of Liberia in the deposits and reserves of liquid and gaseous hydrocarbons within the territorial limits of the Republic of Liberia, whether potential, proven, or actual with the aim of facilitation the development of the oil and gas industry in the Republic of Liberia. However, according to the laws incorporating LPRC, all such agreements and arrangements shall require the final approval of the President of Liberia in consultation with NOCAL.
Furthermore, the approval of the National Oil Company of Liberia is also required for any operation or action, which directly or indirectly affects the rights and benefits of the National Oil Company of Liberia or has the effect of bringing about a change of the management of the holding company.
For the immediate future, experts are divided over the possibilities for Liberia’s potential oil and gas sector which NOCAL believes is expected to become an engine of economic growth and social development as we approach the second decade of the 21st century.
For Neyor, NOCAL has to redefine itself and mobilize both partnerships and resources to become a competitive oil company since Petroleum Exploration activities in Liberia began in the 1940’s with 2D seismic activities and stopped in 1972 for some years.
More complicating for the planned merger, still short on details, is the future of drilling and petroleum activities. How will they be integrated and what would it mean for pending oil explorations on Liberia’s post-war agenda. At least two companies, Chevron and African Petroleum are due to explore oil potential this year, the first since 1970 and 1972 when four wells were drilled in Liberia and years since NOCAL was activated in 1980 through the US$5 Million World Bank loan to finance a Petroleum Exploration Promotion project.
African Petroleum had announced plans to start drilling for oil in March, following a seismic survey of its two exploration blocks eight and nine with plans to bring a floating rig to drill two wells in an area 30 miles off the coast. The drilling will cost $100 million.
Last year, legislature approved an oil-exploration deal with California-based Chevron Corp and Nigeria’s Oranto Petroleum Ltd.
To date, at least ten blocks have contractual agreements, two blocks are under contract negotiation and five blocks in the Harper basin have been through a third bid round. No awards have been made with one block, previously awarded, (LB13) up for mandatory sale. The block was previously awarded to Broadway but has not had any activity since it was purchased in July 2007.AMOCO Liberia Exploration Company was awarded four (4) offshore permits in 1983 for petroleum exploration. Between 1983 and 1984, AMOCO shot extensive seismic and drilled three (3) exploratory wells offshore. In 2009 a third bid round was launched for Blocks LB1 through LB5. No awards have been made.
Avoiding resource curse
Still lingering is the future of the current refinery and the potential for oil. Liberia lies on the north-western edge of the oil-producing Gulf of Guinea, west from minor oil producer Ivory Coast and from Ghana, where foreign companies including Anadarko have made recent major discoveries.
For the foreseeable, economists would been keenly looking to see the pace at which the integration quest moves. The fact of the matter remains that Liberia’s immediate economic outlook appears likely to take a turn for the better or the worse, depending on how the post-war nation handles its looming oil discovery prospects. Avoiding the Dutch Disease and the Resource Curse, a loosely-based term mimicking how the discovery of a natural resource could raise or flatten the value of a nation, experiencing new-found wealth, could be a deciding factor in how Neyor and NOCAL zero in on its plan to integrate NOCAL and LPRC.
For now though, critics of the purported merger say, while the plan, on paper has all the markings of a great undertaking for Liberia, in reality, if the person, whoever heads the post-merger arrangement is corrupt, Liberia could be bound for trouble. “Just imagine how powerful that individual will be?”, said a source, who preferred anonymity for this report. “They need to hire a firm like BakerBotts to help write the policy and put safe guards in place, if not - BILLIONS (not millions) will float out of Liberia.”