11 December 2012

Liberia: Kuwaiti Oil for 'Chopping'?

Credible sources within officialdom on Monday, December 10, 2012 confided in the Independent Authoritative Heritage that the announced Kuwaiti oil deal is a complete replicate of the controversial Nigerian and Japanese oil deal which were characterized by lack of proper accountability and transparency.

There had been persistent public outcry concerning tangible benefits from the controversial LPRC and Japanese oil deal.

Up to date, the actual account of the much publicized Nigerian and Japanese oil deal remains a misery. Findings of the General Auditing Commission (GAC) commissioned audits of the two oil deal speak to volumes regarding lack of proper transparency and accountability.

On December 8, 2012, the management of the Liberia Petroleum Refining Company (LPRC) announced that it had entered into discussions with the Kuwait Petroleum Company (KPC) for the supply of petroleum products at concessionary price. The management of LPRC, in a press release issued in Monrovia, disclosed that these discussions are the result of a request made by President Ellen Johnson-Sirleaf during her last visit to Kuwait.

Said the management of LPRC in the press release: "The request is for a special commercial arrangement between LPRC and KPC for the supply of petroleum products at discount price to enable LPRC bring relief in the form of fuel subsidy to the Liberia Electricity Corporation (LEC), National Transit Authority (NTA) and the John F. Kennedy Hospital (JFK), among others."

"The intention is to help these institutions reduce the high cost of fuel and pass on the savings by expanding services to larger segments of the population, including vulnerable sectors. For example, it will assist LEC in expanding power access to low income families. The NTA will pass on its savings by reduced fares to certain categories of customers including students, security personnel in uniform and the elderly," the LPRC management disclosed in the press release.

"As this is a special bilateral commercial arrangement, only the Ministry of Foreign Affairs and the Liberian Ambassador in Kuwait are assisting the Liberia Petroleum Refining Company (LPRC) in monitoring the progress of these discussions at this time. On the Kuwaiti side, the Kuwaiti Ministry of Foreign Affairs is similarly assisting the Kuwait Petroleum Company, KPC," the management of LPRC further disclosed in the press release.

The LPRC management recalled that on Friday, December 7, 2012, the Liberian Ambassador to Kuwait informed the senior management of LPRC that discussions with the Kuwaiti Authorities were encouraging and that he expects approval from the Kuwait Petroleum Company (KPC) soon.

But contrary to the announcement by the management of the LPRC that the Kuwait oil deal is, among other things, intended to enable the LPRC bring relief in the form of fuel subsidy to the LEC, NTA, the JFK and others, our sources, who begged not to be named, divulged that the said deal is intended to benefit certain government officials (names withheld) as in the case of the Nigerian and Japanese oil deal at the detriment of the mass impoverished Liberians.

According to our sources, the explanation provided by the management of the LPRC regarding the Kuwait oil is a public relations stunt in making the public to believe that the deal is not intended to enrich certain government officials. Among other things, our sources added that they will divulge more hidden information to this paper for the public consumption, as the new oil deal unravels.

Meanwhile, for the benefits of the public and many readers, we now retrospect the GAC commissioned audits of the Nigerian and Japanese oil agreements. Several months ago, Acting Auditor General Winsley Nanka submitted to the National Legislature and the President of Liberia the Japanese Petroleum Non-Project Grant, which is the first Investigative Report on the Japanese Petroleum Non-Project Grant extended to the Government of Liberia.

The Government of Japan extended a grant of one billion, one hundred million Japanese Yen (ÂÂ¥1,100,000,000), to the Government of Liberia under a Grant Arrangement, provisions of which are conveyed in an Exchange of Notes dated March 8, 2011 between the Donor (Japan) and the Recipient (Liberia), for the purpose of contributing to the promotion of the economic and social development efforts by the Government of Liberia. On the basis of information received by my Continuous Audit Team based at the LPRC that there were possible abuses in connection with the Japanese Grant, He directed that an investigation be conducted to determine whether the Japanese Oil delivered had been duly accounted for.

On August 30, 2011, a Memorandum of Understanding was signed by and between the Ministry of Commerce and Industry (MoCI), consignee on behalf of the Government of Liberia and the Liberia Petroleum Refining Company (LPRC); the implementing agent for the monetization of the Japanese donated petroleum products. At the time of the signing of the MoU, the Petroleum Non-Project Grant was valued at thirteen million United States Dollars (US$13,000,000.00) for the supply of 15,000 Metric Tons (MT) of petroleum products from the Government of Japan for monetization, for which proceeds would be used to support development initiatives in Liberia.

The Acting AG observed that Commerce Minister Miata Beysolow and Aminata & Sons did not pass down to consumers a discount of 21.19 percent at the pump, as stated in the MoU between the MoCI and LPRC. Therefore, GAC used the prevailing wholesale market rate to determine the revenue realized by Aminata & Sons. The Ministry of Commerce maintains the official wholesale market rate statistics. At the official wholesale rate of US$4.22 and US$4.37 on the 4,196,343 gallons obtained by Aminata & Sons during the transaction, the total revenue derived from the petroleum sales by Aminata and Sons, Inc., the local distributor selected by LPRC to monetize the product was US$17,889,454.11.

He noted that considering the threshold amount deposited, storage fees, port charges, and administrative cost paid as well as the assumed 10 percent commission payable to Aminata & Sons, Inc., these outlays amounted to US$12,101,320.10. Aminata & Sons, Inc. thus earned in total US$5,788,134.01 beyond the reasonable assumed commission.

Mr. Nanka observed that MD Williams of LPRC failed to award the Japanese Oil Grant contract to Aminata & Sons on a commission basis, given that the proceeds of the grant was intended to contribute to Liberia's economic and social development efforts. A reasonable commission should have been ten percent on the sales of US$17,889,454.11, amounting to US$1,788,945.00 and payable to Aminata & Sons.

Acting AG Nanka further observed that LPRC did not follow the Public Procurement and Concessions Act, 2005 when it contracted Aminata & Sons to sell the donated oil on its behalf. The lack of a competitive bidding process denied assurance that value for money was achieved in the sale of the donated oil. MD Williams violated Section 48(1) of the Public Procurement and Concessions Act for not subjecting the contract to monetize the Japanese Oil Grant to competitive bidding and also for not seeking No Objection from the PPCC in awarding the contract to Aminata & Sons.

He noted that the products were also sold on the Liberian market at the prevailing market rate without taking into consideration the gift element of 21.19 percent as indicated in MOCI's Japanese Donated Petroleum Product Cost Benefit Analysis. From his calculation, the gift element amounted to US$2,749,861.87. There was no evidence to indicate that this gift element was reflected at the pump. His analysis revealed that the Minister of Commerce, Miata Beysolow granted Aminata & Sons a deep discount of 35 percent, amounting to US$4,584,292.90 on the wholesale price.

MD Williams and Commerce Minister Miata Beysolow failed to protect the financial interest of the GoL by not ensuring that the net proceeds of the sale less a reasonable commission was deposited into government's coffers. Commerce Minister Miata Beysolow did not provide any evidence that MoCI monitored the MoU entered into with LPRC, to ensure that its terms and conditions were enforced by LPRC.

Based on the number of financial irregularities and major control deficiencies noted in the report, Acting AG Nanka, among other things, recommended that Aminata & Sons should be made to deposit an additional US$5,788,134.01 into Government Account # 0220630001709 at the Central Bank of Liberia, as the excess income was unjustly accrued to Aminata & Sons as a result of the transaction. This amount includes US$16,000.00 set aside by Aminata and Sons for external audit purposes, as there is no evidence that an audit was conducted, as supported by LPRC's Final Report. "Aminata & Sons, Inc. should be made to deposit the aforesaid amount within thirty (30) days from the date of submission of this report to the National Legislature, and submit a copy of the deposit slip to the Office of the Auditor General for validation. Failure to do so, the Ministry of Justice should institute debt collection action against Aminata & Sons," he stated.

He also recommended that the LPRC's Managing Director T. Nelson Williams should be censured by the President of Liberia for not protecting the interest of the Government of Liberia by ensuring that proceeds of the sales less a reasonable commission was deposited in the account of the Government.

The Minister of Commerce and Industry, Miata Beysolow, he further recommended, should be censured by the President of Liberia for not monitoring the deal to ensure that the terms and conditions were enforced by LPRC, Commerce Minister Miata Beysolow should be censured by the President of Liberia for awarding a deep discount of US$4,584,292.90 to Aminata & Sons without any basis.

Concerning the Nigeria-Liberia oil deal, Nigeria lost over one million barrels of crude oil in a transaction between the Nigeria National Petroleum Corporation (NNPC) and the Liberian Petroleum Refining Company [LPRC], according to an audit report prepared for the Liberian government.

Controversial Harry Greaves was the Managing Director of LPRC at the time the audit was commissioned.

The losses were incurred during the execution of a contract between the NNPC and LPRC for the supply of 10,000 barrels of crude oil per day for a year to the government of Liberia through Addax oil company in 2006-2007, but Addax ended up lifting an excess 1,002,796 barrels, the report said.

"The total quantity of crude oil that the Government of Nigeria through its NNPC agreed to supply to the Government of Liberia through its LPRC was 3,650,000, amounting to 10,000 barrels per day.

"But...Addax continued to lift crude oil in the name of Government of Liberia/LPRC in excess of the agreed upon quantity. The total quantity that was uncovered as being lifted by Addax was 4,652,796 barrels at a total value of US$318,761,591.24. This means 1,002,796 barrels was lifted in excess of the agreed upon quantity," said the report, which was prepared by Liberia's Auditor-General John S. Morlu in April 2011.

Morlu blamed NNPC for the problems in executing the contract, which he said was not legally consummated. "Even though the NNPC did not sign the prepared agreement with LPRC for the supply of the agreed 10,000 barrels of crude per day, the former went ahead and supplied the oil, a situation unexpected in business dealings," he said.

The report said there was no legally binding contract, much less contract modifications, that would provide the legal basis for Addax to lift the excess in the name of the government of Liberia/LPRC. "In all manner of respect, the 'oil deal' was not transparently executed. It was marred by secrecy," Morlu said.

He said neither NNPC nor Addax could provide any justification for the excess oil lifting, adding: "This further demonstrates that this 'Nigerian oil deal' was characterized by a complete lack of transparency, making it difficult to indicate whether value for money was achieved."

The Auditor General said he "sent a team of auditors to NNPC in Nigeria but the cooperation was limited, as NNPC could not indicate the substantive basis for consummating a contractual agreement in the absence of a valid contract that was not duly signed and notarized."

The report said the revenue raised for the Government of Liberia through the deal was understated by US$104,991.32. Addax overpaid fees on its crude lifting as recorded by LPRC to the tune of US$6,599.88. As a result, net shortfall in revenue reported was US$98,391.44.

"Though Addax later remitted the amount to LPRC after I discovered the irregularities leading to the shortfall, in my opinion, the entire oil contract was covered with vagueness. Again, I therefore could not determine whether the deal met the desired benefit for which it was intended," the Liberian Auditor General added.

Daily Trust made unsuccessful efforts to get NNPC's comments on the Liberian audit report. Spokesperson for NNPC Dr. Levi Ajuonuma did not answer or return phone calls, nor did he reply to text messages sent to him by our reporter asking for comments.

But a source at the public affairs unit of Addax Petroleum Limited, who refused to be named, said they were aware of a similar report "some years back" but that the report "was not referring to Addax Petroleum and Exploration." He said Addax is not involved in oil trading but only in exploration and production, and so "there may be a company bearing a similar name which is involved in the Liberian oil deal." (Daily Trust)

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