Recent Oil Deal Represents Risk for Liberia

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    When President Ellen Johnson Sirleaf met her US counterpart Barack Obama in Washington last Friday, the ongoing Ebola response was on the agenda. As the country struggles to get its economy back on track, investigations by Global Witness reveal that the government has sold off valuable oil assets in what appears to be a very bad deal for Liberia.

    A major oil contract, offshore Block 16, was recently handed to a coalition of three companies. One of these appears to lack sufficient funds to operate the oil block, and another has close links to some of Liberia’s worst tax dodgers.  

    This sell-off comes at a time when various oil scandals are brewing in the country. On 23 February the government issued arrest warrants against ten former government officials for their alleged role in a 2006 bribery case.

    Additionally, in December Global Witness received evidence of an unexplained payment of US$ 31,000 made to a Senator on the day that he signed away Block 16.   Two months later the dead body of a whistle-blower lawyer involved in a separate oil scandal investigation was found on a beach. 

    “President Johnson Sirleaf will be looking to demonstrate to President Obama that Liberia has made efforts to reform its oil sector, including moves to indict allegedly corrupt officials,” said Global Witness senior campaigner Jonathan Gant. “Yet this news is unfortunately offset by a slew of recent scandals, including the award of a valuable oil contract to two dodgy companies, the mysterious death of a whistle-blower, and a suspicious payment of US$ 31,000 to a lawmaker.” 

    Liberia put four offshore oil blocks up for bidding at the height of Liberia’s Ebola outbreak, which by December 2014 had killed at least 3,290 people. On 18 December the first, and so far only, of these contracts was finalized. Block 16 was awarded to US-based Liberty Petroleum, Nigerian-based Pillar Oil, and Liberian-based New Millennium Oil and Gas, who together paid US$ 22 million in signature bonuses and other payments. 

    US-registered Liberty holds a 90 percent stake in the contract. Yet the company has only seven employees and a 2014 declared turnover of just US$ 3 million.

    In contrast, assuming that Liberty’s contract complies with the Liberian government’s new model contract (the Block 16 contract is not yet public), Liberty and its junior partners must invest US$ 53 million in the next seven years in oil exploration. Liberty is part-owned, through a series of intermediary companies and trusts, by US Congressman Trent Franks, a Republican representing Arizona’s 8th District.

    “Liberia’s Ebola crisis created an urgent need for funds, and it is understandable that the government would lease oil blocks to meet [that need],” said Jonathan Gant. “But the country, which has a history of oil companies not meeting their contractual obligations, now needs stable and reputable companies that will develop the sector for the benefit of the Liberian people.

    Based on available public information, serious questions should be asked as to whether Liberty, with such meager accounts, can make good on its commitments.” 

    The Wento Factor

    At the same time, Liberian-registered New Millennium, which holds a five percent stake in Block 16, is linked to logging companies that have accrued some of the highest levels of tax arrears in Liberia’s forestry sector. New Millennium lists as a board member, incorporator, and sole agent McDonald Wento. Wento’s history inspires doubt in his intention to manage Block 16 responsibly. As of January 2015, two other companies that Wento partially owns (Geblo Logging and International Consultants Capital), both awarded logging contracts in 2009) had accumulated an unpaid tax bill of US$ 11.7 million. This bill, which represents taxes owed over five years, makes Geblo and International Consultants Capital among Liberia’s worst tax dodgers.

    The Daily Observer contacted Mr. Nathaniel Gbaba, the chief operating officer of New Millenium, who confirmed that his firm was part of the groups that recently bid for Liberia’s oil block 16.  But contrary to Global Witness’ allegation that some of the companies have questionable financial capacity to operate this oil block, Mr. Gbaba said he doubted that GW had read the agreement. 

    According to him, his company, New Millenium did “not have to pay any money until production starts, and that is four to five years down the road.”

    But he could neither confirm nor deny GW’s claim that McDonald Wento, who partially owns Geblo Logging and International Consultants Capital, both of whom had been awarded logging contracts in 2009, had accumulated an unpaid tax bill of US$ 11.7 million.

    “I have no involvement in these logging companies and know nothing about them,” Mr. Gbaba said.  “Your questions can better be answered by Mr. Wento,” Gbaba added.

     Mr. Wento was contacted late yesterday afternoon but said he was in a meeting and promised to call us back, but failed to do so.  Several subsequent calls went unanswered. 

      As regards Nigerian Pillar Oil, Global Witness does not suggest that it is in tax arrears or has an inadequate financial position to service the oil exploration contract.

    “If the aim of the Liberian government was to raise cash when leasing Block 16, it makes little sense to include a company linked to Wento,” said Gant. “The US$ 22 million Liberia received from its oil deal must now be balanced against the US$ 11.7 million owed by logging companies that Wento is linked to. The government will need to ensure that, unlike Geblo and International Consultants Capital, New Millennium makes good on its financial obligations.”

    Anti-Corruption Mixed Messaging

    In recent months, Liberia has shown positive signs of wanting to clean up its oil sector. In December 2014, the government passed a reformed oil law aimed at increasing transparency. In President Johnson Sirleaf’s Annual Message to the Legislature the following month, she outlined ambitious plans for tackling corruption, calling it the “vampire of development and the obstruction of progress.” 

    The Anti-Corruption Commission has also indicted ten former government officials for their alleged involvement in a series of bribes for oil contracts starting in 2006. 

    However, various other oil industry scandals are simultaneously brewing. In December, Global Witness received a copy of a US$ 31,000 check paid from a Liberian government bank account to Senator Sando Johnson, dated 18 December, the same day the legislature passed Block 16. Global Witness has been unable to verify why Sen. Johnson was paid this money or by whom. Liberian legislators are entitled to compensation when they remain in session through their break, as was the case in 2014. Given Liberia’s history of legislators receiving bribes to approve oil contracts, however, this merits investigation.

    Also of concern is the recent death of Michael Allison, a Liberian lawyer at the centre of a government investigation into potentially illegal payments made by the Legislature to lawyers during the drafting of Liberia’s new oil law. Allison, who was found apparently drowned on a Monrovia beach on 13 February, had been named by the Anti-Corruption Commission as the possible recipient of an illegal payment, but was also working with the Commission as a “partner.” Two weeks following Allison’s death, the Liberian government is yet to release the findings of his autopsy, or determine whether or not his death was accidental.  

    It is not suggested that the block 16 concession companies had any connection with Sen. Sando Johnson’s payment or the death of Michael Allison.

    “It is positive that the Liberian government has taken some steps to reform its oil sector, including passing a much-improved oil law and possible indictments of individuals suspected of oil bribery,” said Gant. “However, if these reforms are to be meaningful, the government must ensure that future oil blocks are awarded transparently to companies that are up to the task.

      The government should also ensure that those who break the law are held accountable, investigate any payments made to the Legislature at the time that Block 16 was awarded, and determine whether the death of Allison was related to his role in the Anti-Corruption Commission investigation.”

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