MONROVIA – A FrontPageAfrica Investigation has discovered that 50,651 metric tons, or 76% reduction in gasoline importation for the first seven months of this fiscal year (August 2019 to February 2020), is the primary reason for the acute gasoline shortage recently experienced in Liberia. This was further compounded by the failure of some importers to honor their approved schedules.

The impact of the scarcity cannot be overemphasized. Transportation fares skyrocketed, movements of people, goods and services came close to being fully halted, and the fever pitch of emotions reached levels that threatened national security.

Background

All petroleum products consumed in Liberia are imported by private business entities licensed by the Liberia Petroleum Refining Company (LPRC). These products are in four basic grades: Gasoline (PMS), Gasoil/Diesel Fuel (AGO), Heavy Fuel OIL (HFO) and Jet Fuel (Jet A1).

For a period prior to the onset of the Liberian civil war, LPRC, which is 100% owned by the Liberian Government, stopped importing petroleum products directly, and licensed out it’s exclusivity to qualified entities, on an annualized basis, for a fee. Licenses may be renewed. Currently, there are eighteen (18) licensed importers for the fiscal year July 1, 2019 to June 30, 2020. By the terms of their license agreements, all importers are required to import a minimum of 5,000 metric tons, per quarter, of mixed products (PMS & AGO), or not less than 2,500 metric tons per shipment.

Each Importer is also required to submit to LPRC, a written importation request stating the type, quantity and details of shipment fifteen days (15) prior to the expected docking of the ship at the Free Port of Monrovia for discharge. Based on the importation request, LPRC then issues an official response indicating the approved quantities for importation, and assigns a vessel arrival time for the shipment.

To issue assignments for vessels, LPRC must make two important considerations. They include:

A review of the history of past importation performance, and 2. Availability of tank spaces (ullage).

LPRC owns and operates the Product Storage Terminal (PST), which is located on Bushrod Island. The PST houses two ‘tank farms’ – a group of storage tanks – with the combined capacity of 61,000 metric tons for Gasoline, Diesel fuel and Jet fuel.

There are also three privately-owned and operated petroleum storage facilities: SRIMEX, which is located just in the back of the PST; CONEX, which is located opposite the old BMC Facility; and CHINA UNION, which is located within the old BMC Facility. As indicated, the three facilities are operated privately and outside of the supervision and control of the LPRC. In exchange, LPRC receives royalty of US$0.03 on every gallon of products stored in these private facilities. The private ownership and management of the three storage facilities came into being under the administration of President Ellen Johnson-Sirleaf.

If, for any reason, LPRC has to store products in any of the three private storage facilities, the government-owned entity automatically loses US$0.17 per gallon. Per the storage agreements entered into with the three companies, LPRC is only to receive US$0.03 per gallon for products stored in the three private facilities rather than the US$0.20 charged for storage.

Our investigation concluded that the 50,651 metric tons, or 76% reduction in gasoline importation for the first seven months of this fiscal year, is the primary reason for the acute gasoline shortage recently experienced in Liberia. This was further compounded by the failure of some importers to honor their approved schedules.

What Went Wrong

Our investigation unearthed several factors:

1. Four (4) Importers made requests for the importation of gasoline into LPRC storage and obtained approval with assigned vessel arrival time designated as between November 2019 and January 2020. Of the four, only one Importer, CONEX PETROLEUM, honored her vessel approval on December 2, 2019. Petro Trade, Gboni and Aminata did not honor their gasoline importation request voluntarily made to LPRC, for which approvals were given by the LPRC.

2. For the first seven months of this fiscal year (July 2019 – January 2020), with the exception of TOTAL that stores her gasoline at CONEX’s private facility, only five (5) importers out of the remaining seventeen (17) imported gasoline into LPRC. The five importers are: NEXIUM (July 2019), MOTC (July 2019), JUICE (July 2019) PETRO TRADE (September 2019) and CONEX (December 2019). Twelve (12) licensed importers made zero (0) gasoline importation over the same period.

3. For the same seven-month period (July 2019 – January 2020), the total gasoline imported into LPRC tanks was 16,244 metric tons. Interestingly, our investigation discovered that for the first seven months of the past fiscal period (July 2018 – January 2019), gasoline importation into LPRC was 66,895 metric tons.

In effect, the gasoline importation for the first seven months of this fiscal year dropped by at least 76% (50,651 metric tons)

4. The largest gasoline importer into LPRC storage, Petro Trade, has made just one shipment in the seven-month period (September 9, 2019) compared to three shipments over this same timeframe in the last fiscal year. Petro Trade indicated to LPRC that her scheduled January gasoline importation (Jan. 5 -10, 2020) was diverted to Guinea to “off load” a portion of the gasoline in order to reduce the ship’s arrival draft below 10 meters in the wake of the ‘Entry Channel Draft Restriction’ at the Port, and that the vessel would subsequently return in a few days. This vessel has still not returned from Guinea.

Importers Stock And Tank Variances

An issue of concern was the variance in LPRC tanks and on the books of importers. This was especially highlighted by the Minister of Commerce, Hon. Wilson Tarpeh, indicating amidst the shortage that the importers’ gasoline stock was at variance with the physical stock in the LPRC Tanks. He furthered that this was recently discovered when the current Managing Director, Madam Marie Urey Coleman, ‘calibrated her tanks’.

However, documents unearthed by our investigation show that as far back as the administration of the late Harry Greaves, former Managing Director of LPRC, the accumulation and accounting of these variances were severally documented, reported, and known to the importers. Successive past LPRC administrations reported the gradual accumulation of these variances which are on both gasoline and diesel fuel.

In those reports which goes as far back as fourteen years, several reasons are provided for the variances. These include: tanks floor leakages, tanks ruptures, water accumulation, stripping, sludge accumulation, change in reference heights, tanks demolitions, to name a few.

Essentially, even prior to the administration of Madam Ellen Johnson-Sirleaf, the management of LPRC headed by Hon. Edwin Melvin Snowe entered into a Rehabilitation Contract with the Mechanical Engineering Group, MEG, for the refurbishing of the aged Products Storage Terminal (PST) Tanks. The tanks were evidently old, leaky, tilted, corroded on the shells and roof, foundations had sunk below the earth’s surface, and overall, presented increasing risks to fuel security.

It is these same tanks, some of which are still in use today, in which LPRC is managing to hold fuel stock for the country. The PST Rehabilitation Project did not get started until several years later under the administration of Mr. T. Nelson Williams, with a new contract and contractor. This new contract was again terminated in the aftermath of the Ebola crisis.

For the same basic reasons of the aged storage facilities, the administration of Professor Sumo Kupee concluded the procurement process he inherited for the award of the ongoing PST facility expansion and rehabilitation.

Records in our possession show a variance of 162,158 gallons on June 2, 2010. Three months later, in October 2010, the variance had increased to 223,695 gallons. On November 15, 2010 a Stock Verification Committee constituted by former LPRC DMD/Operations, Aaron J. Wheagar and Chaired by former LPRC Maintenance Manager, Sarlee Sartee II reported a variance of 352,305 gallons. On September 1, 2012 the than Acting Operations Manager of LPRC, Mr. Isaac Karmon reported a stock variance of 874,748 gallons.

These reports, amongst many in our possession, point to the aged variances in stocks at LPRC many years prior to this current administration. These variances increased with the demolition of every storage tanks in LPRC due to the years of sludge accumulation at the bottom of the tanks. This situation is further compounded by the storing of ‘water blankets’ in the old tanks.

The administration of T. Nelson Williams attempted to harmonize the variances in November 2012 through LPRC budgetary appropriation. This effort failed in its implementation according to a letter in our possession.

Since then, successive administrations have recognized the variances but have failed to address it conclusively with importers who continue to carry same on their books. The available documents confirm that the stock and tank variances are therefore not an occurrence discovered just over the past weeks or only after a recent calibration of the tanks by the current administration.

Provisional Lifting At LPRC

Just like the variance in stock that is aged. Provisional Lifting is a stock movement practice the LPRC employs to ensure the continued and uninterrupted supply of petroleum products. Basically, although an importer may have exhausted its balances with LPRC, upon specific requests, said importer may be permitted to lift provisionally, with the understanding of adjusting their stock balance upon their shipment and delivery. ALL LICENSED IMPORTERS that are importing regularly are beneficiaries of this acceptable and controlled practice.

The practice predates the CDC Government. However, there are instances in which the good intentions of provisional lifting can be abused when the beneficiary importer defaults in honoring their importation commitment. Such grave defaults may be grounds for proved non-performance, and therefore, refusal of LPRC to renew license agreements with importers.

Our investigation gathered that since the administration of Sump Kupee (2016/2017), three importers are on the books of the LPRC for outstanding provisional lifting. These three importers (KAILANDO, SRIMEX and MOTC), officially requested and obtained the approval of the Managing Director, Mr. Kupee, for provisional lifting based on separate requests and conditions. One of the conditions was to supply AGO to the Liberia Electricity Corporation (LEC) with which one of the importers had a supply contract but had balances which could not, at the presenting time, meet the demand of the LEC for the needed AGO.

Gasoline Stored At Srimex Private Terminal

Amidst the ongoing PST PHASE #1 REHABILITATION PROJECT, three gasoline tanks were demolished more than a year ago. These three tanks have combined capacities of approximately 10,000 metric tons. This represents a temporary PMS storage loss of this same quantity.

As such, giving an average of three shipments to LPRC per month, LPRC could not hold the PMS stock in her tanks without incurring ‘DEMURRAGES’ – costs to LPRC for vessel overstays and delays. In order to avoid these costs, a request was made to store some gasoline into Srimex tanks.

While the cost of storing in Srimex tanks was a financial loss to LPRC, this loss was far cheaper than the demurrage cost. Some of the products stored with Srimex had been in her tanks for more than a year.

Accordingly, LPRC opted to hold the products with Srimex in strategic reserve, and focus on doing daily lifting from her (LPRC) own tanks in order to continuously create space/ ullage in her tanks for new importations. The alternative was to draw down on the products stored in Srimex tanks, only to redirect subsequent shipments and deliveries back to Srimex. This option would have resulted into a spiral of storage fee losses to LPRC. For every gallon of gasoline stored in Srimex tanks, LPRC sustains a loss of US$0.17.

Srimex has confirmed the storing of gasoline in her tanks by LPRC. Srimex also confirmed that portion of these products were officially lifted by LPRC through its Marketing Department. In a letter to the Presidential Task force Investigating the Gasoline Crisis, Srimex also confirmed that the decision to move the remaining gasoline stored in its tanks was made by Srimex without reference to LPRC, citing “the long delay on the part of LPRC to lift the products especially in the face of daily evaporation losses”, as reason for it’s action. Meanwhile, Srimex has committed to return the LPRC product.

Restriction At The NPA Entry Channel

In October 2019, The National Port Authority (NPA), circulated via email, a memorandum to all port users and shipping agents informing of the reduction in the depth of the Port’s Entry Channel from 12 meters to 10 meters. Therefore, all vessels coming into the Free Port of Monrovia had to sail with arrival draft of less than 10 meters to be able to enter the Port.

Although LPRC was not copied on this email, the agents handling petroleum tankers including BOLORE, OBT SHIPPING, GREENVILLE SHIPPING, all of which are nominated representatives of overseas petroleum suppliers, received the email notification.

Suppliers were therefore made aware, through their local shipping agents, of the new restrictions. These shipping agents, amongst other duties, are hired to process vessels arrival, in-port operations, and departures. They, therefore, liaise with APM Terminals, giving any and every NPA restriction to determine vessels suitability to call-in at the Freeport of Monrovia.

Our investigation uncovered that LPRC was made aware of this restriction in December 2019, by its largest gasoline importer, Petro Trade, when Petro Trade informed the LPRC that its supplier was finding it very difficult to source a vessel of the required draft depth to call on Monrovia, in keeping with the new draft restriction.

Petro Trade informed that several vessels which were under time charter had been disapproved by local shipping agents as not meeting the new restriction. Petroleum vessels are not usually loaded for specific ports. They are usually fully loaded and make timed-stops across several ports and countries. The new restrictions meant calling on The Freeport of Monrovia after offloading in several countries, the serious challenge of which is that for the vessels and shippers, it is easier to offload in Monrovia en route to many of its neighboring ports including Guinea and Sierra Leone, as opposed to offloading in those countries and coming back to Monrovia, which the new restrictions on depth inadvertently demanded.

As an alternative for the receipt of smaller-sized tankers, the LPRC immediately undertook the reopening of its old, dilapidated and nearly-abandoned Oil Jetty as the NEW LPRC OIL JETTY cannot accommodate smaller tankers.

Our investigation, however, cannot conclusively quantify the impact of the port restrictions on the recent gasoline shortage because although Petro Trade is the largest importer, it was the only importer that registered this impediment and concern with the LPRC.

Petro Trade had committed to the LPRC that the vessel with 8,000 metric tons of PMS for its account had therefore sailed to the Republic of Guinea to reduce its cargo weight prior to coming to Monrovia with the required depth. A period of three days was given as notice of the vessel’s return. After more than a month, the vessel has still not called on the Freeport of Monrovia.