Twist of Once Promising Fortune: Liberia – A Lull in Oil Boom

Monrovia – When Canadian Overseas Petroleum Limited announced last week that it had signed definitive agreements with UK investors for an £800,000 fund raise, whose proceeds will support the group through the drilling of the hotly anticipated first well offshore Liberia with Exxon Mobil Corporation, as well as covering overhead costs for the Nigerian oil appraisal and development project, it marked a fresh twist to Liberia’s declining but once promising oil sector.

A once promising petroleum industry operation remains on ice as Canadian firm, COPL Eyes Drilling in Liberia by Year’s End

Today, Liberia, in the footsteps of the Gulf of Guinea and neighbours Ghana and Nigeria finds itself on the fringes of a declining oil market even as economists’ estimate that it could take the country a few years to regain its economic footing after Ebola.

But gauging the expectations of the oil sector, seen as a major part of that prediction, like many other industries on the decline, could prove to be Liberia’s greatest challenge even as many now agree that it is no longer a question of a once-promising sector staring down the barrel of a boon or bust scenario; but a whether it can fully recover from a period of mismanagement now eclipsed by an unexpected downturn in fortunes toward a state of gloom and uncertainty.

Until now, Liberia has been struggling to keep its flailing oil sector relevant following the dissolution of the board and management team, leaving a shell of what had all the markings of rags to boom for a nation struggling to restore its economic sanity after more than a decade of war.

Chevron, one of the first bright spots has worn out its contract after working with international and Liberian partners to drill some of the first deep-water wells in Liberia in decades with rights to Blocks 11, 12, and 14.

FrontPageAfrica citing sources reported recently that the company, had initially wanted to leave last year but was asked by the NOCAL management to hang on in a bid to avoid relinquishment, which would have been detrimental to Liberia.

In August 2010, Chevron entered into an agreement with Liberia to explore three deepwater concessions in Liberian waters. Under the agreement, the company agreed to conduct a three-year exploratory program which began in 2010.

Liberia has in recent weeks been struggling to conclude production sharing contract arrangements related to the 2014 Liberia Basin Bid Round For Oil Blocks 6,7 and 17 as well as looming bankruptcy of the struggling NOCAL in order to save it from collapse. But the dissolution of the board by the President followed by the resignation of board chair Seward Cooper crippled operations as Chevron takes its exit.

Cllr. Cooper’s resignation comes less than a year after President Sirleaf retired the President and chief executive officer (CEO) of the National Oil Company of Liberia (NOCAL), Dr. Randolph McClain, with severance pay as approved by the Board and some members of the board.

NOCAL’s demise has put many of the cash-trapped company’s community projects on hold, leaving many in dire straits. For example, a recent FrontPageAfrica investigation uncovered that projects funded by NOCAL’s Corporate Social Responsibility program did not exist.

Last August, President Ellen Johnson-Sirleaf took full responsibility for the demise of the National Oil Company of Liberia, while noting that there were a Board of Directors and Management Team that should have taken the right decisions to prevent the situation.

“Well, as the head of the country, I have to take responsibility…,” she said in an interview with reporters upon arrival at the Roberts International Airport, from Tokyo, Japan, on Sunday, August 30, 2015.

Part of the reason for the company’s collapse was due to reported high salaries paid to senior managers prompting the President to implement measures in a bid to address the dilemma. “That’s the reason why today I have all the State Owned Enterprises now; I have those information on their salaries, their benefits. We are looking at them now to make sure their boards are functioning well and that there is reduction in cost so we won’t face any company closing anymore.”

But the intervention has been troubled by the lack of funding to keep the company afloat.

The President did tell FrontPageAfrica in an interview recently that efforts were being made to address unpaid salaries to lower-level staffers at NOCAL while lamenting the failure of her administration to conclude a deal with the Brazilian oil giant, Cosmos.

Said Sirleaf: “The whole NOCAL story is really a sad one and that is why I do not want to say much until that audit is concluded, because one will find that much of the big money that they said NOCAL had some of that money went to government too, but you know let the audit disclose that. Of course there were high spending, high salaries, and excessively high salaries at the top level.”

Regarding the Cosmos deal, Sirleaf said: “We had counted on closing one last deal not only to safe NOCAL and provide them with the resources to keep them going but also providing Liberia with the resources and helping the petroleum industry going when we tried the KOSMOS deal and we took a long time to negotiate that deal, it was a good deal because Chevron was closing down, ExxonMobil was stagnant and KOSMOS was the only thing. Another Nigerian company was also backing off; KOSMOS was the only thing we had to keep NOCAL alive.

The administration, the Executive did the negotiation processes, the legislature did not see it fit to conclude it and that was that, that just dropped the bottom. So we have been trying to pay the other people, not the high executives, they have been paying them through increments, so we are trying to see to get some more money before we close the books to be able to settle the rest of the people.”

But the bulk of NOCAL’s problem, at least politically has been the issue yet-to-be conducted audits during the era of Robert Sirleaf, who served as chairman of the board for eighteen months. In September 2013, President Ellen Johnson-Sirleaf accepted Robert’s resignation, declaring:

“As NOCAL Chairman, you have accomplished the primary mission I entrusted to you in the last 18 months: to successfully lead the reform of our nation’s oil sector into a transparent, accountable framework that will nourish the inclusive development of our country. I salute the extraordinary leadership and dedication you showed in that task. Your job is now complete, and fulfils the promise made to the Liberian people.”

Sirleaf clarified that that a first audit of NOCAL has already been completed, covering 2009 to 2011.

“That audit report has been released. I personally called the Auditor general and said please put on a fast-track the other audit that takes it up to the current period, right up 2000 something, that audit is on right now. That audit as the Auditor General knows, they have the freedom to audit and audit it properly and fully, and it is on, so it is not the question of commissioning an audit. It has.”

It remains unclear how serious COPL’s interest in Liberia will be in the wake of slumping prices and international economic downturn. But the company announced a C$6m funding in Canada, and Arthur Millholland, chief executive, told Proactive Investors that funds will be used to cement the company’s footing in West Africa”.

According to a report, proceeds from the share placing will support the group through the drilling of the hotly anticipated first well offshore Liberia with Exxon Mobil Corporation (NYSE:XOM), as well as covering overhead costs for the Nigerian oil appraisal and development project.

On the oil price, Millholland says the market is trying to find a place where it is going to settle, but adds that the potential projects the company is interested in are “more than economic at these prices”.

For the foreseeable future, the fate of Liberia’s once promising sector remains in limbo.

The post-war nation which once boasted, since 2010, exploration rights for eight offshore blocks to bidders including Exxon Mobil, Chevron and Anadarko Petroleum now finds itself in a lull.

n addition to COPL, , pain’s Repsol, Mistubishi Corp. of Japan, European Hydrocarbons/African Petroleum (listed in Oslo and Australia), Compania Espanola de Petroleos (Cepsa), the Spanish oil company owned by Abu Dhabi’s International Petroleum Investment Company, and a Nigerian oil firm called Oranto have all taken turns at Liberia’s once promising wells.

As for actually finding oil, the possibilities were promising but uncertain. Chevron successfully drilled several exploration wells, but finding value of commercial quantity was said to be years — and billions of dollars in infrastructure, according to analysts. There was also the controversial announcement by the Frank Timis-owned African Petroleum which reported that it had found oil in one the blocks which later proved to be a drummed up play for commercial sale of the company’s interests in Liberia.

ExxonMobil, the operator of LB-13 of which COPL has 20 percent interest, in the block located18 miles (30 kilometers) offshore Liberia’s central coast has yet to drill a well off the coast of Liberia although it promised in the aftermath of the deadly Ebola virus outbreak that it intends to drill, winning praise from President Sirleaf who described the move as a sign of economic recovery after the Ebola epidemic which killed 4,800 people in the country and deterred investors.

Today, Liberia, in the footsteps of the Gulf of Guinea and neighbours Ghana and Nigeria finds itself on the fringes of a declining oil market even as economists’ estimate that it could take the country a few years to regain its economic footing after Ebola.

But gauging the expectations of the oil sector, seen as a major part of that prediction, like many other industries on the decline, could prove to be Liberia’s greatest challenge even as many now agree that it is no longer a question of a once-promising sector staring down the barrel of a boon or bust scenario; but a whether it can fully recover from a period of mismanagement now eclipsed by an unexpected downturn in fortunes toward a state of gloom and uncertainty.

Rodney D. Sieh, rodney.sieh@frontpageafricaonline.com

ChevronCOPLExxon MobilKOSMOSNOCAL
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