IDRC-MR192e

ENERGY DECISIONS IN DEVELOPING COUNTRIES IN AFRICA A Case Study of

Ogunlade R. Davidson Director, University Research and Development Services Bureau, University of Sierra Leone, , Sierra Leone

Material contained in this report is produced as submitted and has not been subjected to peer review or rigorous editing by IORC Communications Division staff. Unless otherwise stated, copyright for material in this report is held by the author. Mention of proprietary names does not constitute endorsement of the product and is given only for information. DECLARATION

This report is prepared under contract with the International Development Research Centre (IDRC), Ottawa, Canada and should not be quoted or duplicated with the permission of the Centre.

The views expressed in the report are those of the author and not of IDRC.

Ogunlade R. Davidson

July 1986 ACKNOWLEDGEMENTS

This study was commissioned by the Energy, Science and Technology Policy Studies Unit of the Social Sciences Division of IDRC.

The consultant is greatly appreciative of the opportunity given to him to carry out this study and to continue to serve IDRC. He wishes to extend his gratitude to several people who have contributed to this project. Firstly to the staff of the University Research and Services Bureau who has helped in information gathering and typing the draft of this report especially Mr. Adeshino Taylor, Miss Eleanor Hanciles, Mrs. Sarian Aiydeke and Miss M. Neville for the computational work. Lastly I must express my thanks to all the respondents that helped in making our information searching exercise possible. TABLE OF CONTENTS

LIST OF TABLES

EXECUTIVE SUMMARY

CHAPTER 1 GENERAL INTRODUCTION 1 1. 1 INTRODUCTION 1 1. 2 SOCIO-ECONOMIC FEATURES 4 1 • 3 THE PROJECT 5 1. 4 SOURCES OF DATE 7

CHAPTER 2 THE ENERGY SCENE 8 2. 1 ENERGY AND THE ECONOMY 8 2.2 ENERGY SOURCES 11 2.3 INSTITUTIONAL FRAMEWORK 14 2.4 ENERGY PRODUCTION 16 2.5 ENERGY CONSUMPTION 20

CHAPTER 3 POLICIES AND DECISIONS IN THE ENERGY SECTOR 22 3. 1 POLICY-MAKING MACHINERY 22 3.2 NATIONAL DEVELOPMENT PLANS 23 3.3 MAJOR DECISIONS IN THE ENERGY SECTOR 28

CHAPTER 4 FACTORS UNDERLYING POLICIES AND DECISIONS IN THE SUB-SECTOR 37 4.1 CRUDE OIL EXPLORATION 37 4.2 CRUDE OIL PROCUREMENT 42 4.3 PRODUCTION OF PETROLEUM DERIVATIVES 44 4.4 DISTRIBUTION OF PETROLEUM PRODUCTS 46 4.5 PRICING OF PETROLEUM PRODUCTS 48 4.6 ENERGY CONSERVATION MEASURES 50

CHAPTER 5 FACTORS UNDERLYING POLICIES AND DECISIONS IN THE HYDRO SUB-SECTOR 53 5.1 NATIONAL POWER AUTHORITY 54 5.2 BUMBUNA HYDRO PROJECT 57 5.3 GOMA HYDRO PROJECT 64 5.4 PROJECT 65

CHAPTER 6 IMPACT OF DECISIONS IN THE ENERGY SECTOR ON THE SUB-SECTORS 67 6.1 RESEARCH AND DEVELOPMENT 67 6.2 OVERALL ENERGY SITUATION 70 6.3 NATIONAL ENERGY PLANNING 71 TABLE OF CONTENTS

CHAPTER 7 MAJOR FINDINGS AND CONCLUSIONS 73 7. 1 MAJOR FINDINGS 73 7.2 SUGGESTED AREAS FOR ACTION 77 7.3 PROSPECTS IN THE ENERGY SECTOR 79

REFERENCES 82

TABLES 88 LIST OF TABLES

2.1 CERTAIN GENERAL PARAMETERS OF THE ECONOMY

2.2 CRUDE OIL IMPORTS AND ITS RELATION TO TRADE STATISTICS

2.3 PRODUCTS FROM THE REFINERY IN SIERRA LEONE (1971-1974)

2.4 ENERGY CONSUMPTION IN SIERRA LEONA BY SECTORS, 1982 (TJ)

4.1 PROFIT AND LOSS ACCOUNT OF THE REFINERY

4.2 PRICE OF CRUDE OIL TO THE GOVERNMENT COMPARED TO WORLD PRICE

4.3 PRICE STRUCTURE OF PETROLUEM PRODUCTS (1971-86)

5.1 DATA OF POWER SECTOR IN SIERRA LEONE (1971-85)

5.2 SUMMARY OF FINANCIAL STATEMENTS OF NPA (1979-82)

5.3 HYDRO-ELECTRIC SOURCES IN SIERRA LEONE

5.4 SOURCES OF FINANCING OF BUMBUNA PROJECT (1970-84) EXECUTIVE SUMMARY

This project attempts to look at the various decisions that were made by the Sierra Leone government as a response to the two oil shock prices experienced in 1973 and 1979 respectively. Due to the impact these shocks had on the economy, the two most affected sub-sectors are the areas the project concentrated on which are the hydro and the petroleum sub-sectors.

After a brief review of the country's energy situation in which the various energy sources, institutional framework and consumption patterns were considered, the decisions by the government in the energy sector were presented. The underlying factors that may have caused these decisions in the petroleum and the hydro sub-sectors were analysed. The impact of these decisions on the other areas of the sector were then looked into. The areas considered are research and development, the energy situation as a whole, and energy planning and policy in general. This was concluded by outlining the major findings of the study and commenting on the prospects in the energy sector as whole.

The decisions made by the government in the energy sector for the period under review fall into three main categories: the petroleum, the power and institutional. In the petroleum sub-sector, the decisions were concentrated on oil exploration agreements and pricing of petroleum products. Those on power were on the Bumbuna project development and the strenthen of the power supply authority. Various new institutions were set up during the

vii period reviewed, these include the Ministry of Energy and Power, the national oil company and government taken over the procurement of crude oil.

During the period under review, 3 sets of agreements were signed with a total of over 9 different companies all foreign to carry out crude oil exploration activities in the country in 1979, 1982 and 1984 respectively. Though two wells were drilled at different periods by two different companies, they were both abandoned because found dry as reported. The decision by the government to procure crude oil directly and the lack of foreign currency has caused acute shortages that resulted in serious problems for the population, despite efforts by government and the oil distribution companies to allievate the situation. The change in government's pricing policies of petroleum products is causing problems for users especially the poor.

The inability of the national authority to satisfy the nation's need has seriously undermined their credibility and as the study shows the number of private generation has increased substantially, almost 70% of that of NPA. The effect of this on the economy of the country is disastrous. During the period reviewed, a total of 9 feasibility studies were carried out on the Bumbuna hydro project. These studies which end up mostly as duplicity in the project has caused delay that will affect the future of the project. It is not easy to identify why the project did not start in the mid 70's when capital for such projects were more readily available. The future of the MRU hydro project is not promising because both and Sierra Leone that should benefit from the project are occupied with national projects.

viii The various energy decisions taken only illustrates the gap between research and government interest in the sector. Energy research have been focussed on new and renewable resources, while government's interest are on more commercial energy sources, however there are now signs that the gap is reducing. The lack of adequate planning and absence of proper policy in this sector show that the decisions taken were done mostly on a ad-hoc basis with hardly any baseline study, hence the problems they were meant to solve still persists.

The major findings of the study can be summarised as follows:

The government entered into oil exploration agreements ill-prepared and ill-equiped and so has limited access to the exploration results.

Procurement of crude oil by the government through an agent have prove to create scarcity that have resulted in serious shortages in the sector.

Since 1980, the government has been paying over 5 dollars per barrel above the official price and over 6 dollars over spot price.

The technical and financial problems of NPA have made unable to supply power reliably and at affordable price.

ix The delay in getting the Bumbuna project started has narrowed the chances of it being implemented. The role of the multiple studies on this project is seriously questioned.

From these findings, certain areas were suggested for action to be taken by the government, these are:

i) Contract research should be made to local personnel to study the following: a) the oil exploration activities so far carried out in order to ascertain the true picture, b) existing oil procurement system with the hope of suggesting a more appropriate one, c) a more suitable pricing policy for petroleum products, and d) a detailed study of NPA activities to include areas previous studies did not cover. ii) Adequate policies should be instituted to set up a) an advisory committee on energy to the government, b) an for power supply that involves the government, the suppliers and the consumers, and c) an hydro development plan that should contain the reduced Bumbuna and two smaller plants in Kono and Bo.

The study shows that the economy of the country will dominates the future development in the sector and since that is not good at the moment the prospects are not very bright though some positive signs by the government to change the oil procurement, and committed role to Bumbuna project.

x CHAPTER 1

GENERAL INTRODUCTION

1.1 INTRODUCTION

The unprecedented escalation of the world price of crude petroleum in 1973 and 1979 led most countries worldwide to embark on stringent measures aimed at restructuring their economies, particularly in the energy sector. These moves were necessary because these price hikes showed clearly the dependence of the world energy market on crude petroleum. However, the way in which the various countries responded clearly illustrated the difference between developed and the developing countries. Whereas most of the developed countries adopted strategies to reduce their total energy consumption and lessen their dependence on petroleum as the main energy source, the oil-importing developingcountries failed to come up with decisive plans to help restructure their energy economies. Because of their already poor economies, these countries suffered the full impact of the problems these price hikes caused to the world economy. In the case of the oil-producing developing countries, their huge earnings from oil not only made them dependent on oil as the major energy source, but also became the main source of earnings of their economies. Surplus earnings were invested in the developed countries in various projects.

In general, some of the policies adopted by the industrialized countries had significant impact on their total energy consumption, hence on their overall economy. These policies include reducing the role imported energy

-1- plays in the (GDP), improving through productivity and fully utilizing pricing mechanisms to control demand. To illustrate the importance of these measures, is to look at the case of the countries of the Organization for Economic Cooperation and Development (OECD). In response to the price rises in crude oil, they instituted policies to promote alternative sources of energy, increasing the use of coal, adopt minimum energy efficiency standards, promote nuclear energy for electricity production and progressively reduce the use of crude oil. Due to the adoption of these measures, the International Energy Agency (IEA) observed (Kabuysi and Naylor, 1985):

Their real GDP increased by 19% but increase in total energy requirements was only 4%.

Oil imports from all sources were reduced by 14%, and the crude oil used in producing one unit of GDP declined by 20%.

Domestic energy production increased by 13% with oil rising by 9%, coal by 23% and nuclear by 206%.

It may be argued that there were several support systems in these countries to assist them in achieving such gains in their energy economies, but there are certain lessons from these experiences that developing countries can learn. There are three main lessons: i) Developing countries need not follow the path of development of the developed countries, in which the energy consumption was directly related to GDP. The

-2- above case has shown that increases in GDP can be achieved with far smaller increases in energy consumption.

ii) Industrialization, their main goal, can be achieved while dependence on crude oil can at the same time be reduced.

iii) With the right policies, energy consumption based on local energy sources can be increased significantly without sacrificing economic growth.

The situation is very gloomy for most developing countries including, now, some of those that produce oil. The economic situation of the oil-importing developing countries prevented them from taking advantage of the price drop in crude oil experienced recently; despite the oil glut in the world market some of them did not have the liquid cash needed to purchase all their requirements. Some of the oil-producing countries made major borrowing when they were receiving huge earnings, and the drop in earnings due to the price drop created serious problems for their economies.

It is therefore necessary that developing countries embark on planned policies both at national and regional levels to respond to such shocks. The state of their present economies, with external debts so huge that they are finding difficult to even pay the charges on them, only reinforces the need for effective planning and management in all sectors of the economy, particularly the energy sector. Actions so far, for most of them, has been ad-hoc decisions based on crisis management. Apart from the short-term nature of these actions, they do not always

-3- achieve even the immediate gains expected. It was against this background that this project was formulated to look at the various decisions made in the energy sector of Sierra Leone, a typical oil-importing developing country.

Sierra Leone, to which this study is restricted, is a typical country in sub-saharan Africa in that it has abundant energy sources, but owing to inadequate management and planning these sources are not developed, Sierra Leone is heavily dependent on imported crude oil and because of the current global situation, there are now signs of fuel shortages in the country.

1.2 SOCIO-BCONOMIC FEATURES

Sierra Leone occupies 72326 km2 on the west coast of Africa. The topography can be divided into four regions: an interior plateau and hills with altitudes of 427-1948 m and mean annual rainfall of 2000-3302mm; interior plains with altitudes 30-305 m and mean annual rainfall 2540-3556mm; coastal swamps 0-15 m and mean annual rainfall of 2749-4318mm; and the Freetown peninsula with altitude 0-88 m and mean annual rainfall of 5080-7620mm. The country has 10 major rivers running from the northeast to southwest, most of which can be harnessed for producing electricity. The climate has two distinct seasons, the dry season from November to May and the rainy season from June to October. Mean monthly temperatures are highest March to April (30-34C) and lowest July to August (25-26C}.

-4- The population of the country is 3.76 million (1985 census). The main towns of the country are affected by migrants from rural areas in search of a better standard of living, though the rural areas still housed between 70% and 75% of the population. The annual national population growth rate, according to the last census, was 2.31%.

Sierra Leone's economy is characterized by excessive government spending, misguided internal monetary policies, poorly managed public enterprises, sluggish economic growth, dwindling agricultural and exports and increasing imports. These factors have resulted in very high rates, a scarcity of foreign exchange and growth in the parallel market. Hence the country has been financing its mounting budget deficit by excessive borrowing from international and national sources. As it imports all its crude oil, which accounts for over 95% of the commercial energy it needs, there are very strong relationships between the energy sector and the national economy: this will be discussed further in the next chapter. The foreign exchange scarcity now being experienced can be attributed to two features. One is declining export earnings mainly due to fluctuations of commodity prices in the world market: the other is the gradual depletion of the country's major mineral reserves (diamonds and iron ore). These problems have significantly worsened by the intense illegal border trade now prevailing in the country.

1.3 THE PROJECT

This project was initiated primarily to look at the policy responses by oil-importing less-developed countries (LDCs) to the huge price increases of crude petroleum since

-5- 1972. As mentioned earlier, Sierra Leone will be treated as a case study as it is typical of such countries. The project will concentrate specifically on crude oil imports and developments in the hydro sources, because these two subsectors dominated the energy scene of the country since the early 1970s and enable us to examine the various decisions made in the energy sector.

The objectives of the project are: -

(1) To provide a general description of energy production and consumption in Sierra Leone;

(2) To describe recent government policies and decisions-making in the energy sector, starting in 1972 (oil crisis);

(3) To determine and analyse domestic and external factors that have influenced decision making, with special attention to the hydro power sector and petroleum production, imports and distribution; and

(4) To identify and assess the impact of energy decisions on energy policy planning, energy research direction and utilization and the overall energy situation and prospects in the country.

-6- 1.4 SOURCES OF DATA

Different sources were contacted for information to carry out the tasks involved in the study. First, an intensive desk survey was embarked on, but this exercise did not prove useful because not much has been documented on the subject. The next step was to consult various government documents; these include speeches, parliamentary debates, national newspapers etc. Information received from this exercise was supplemented by interviews with relevant personnel during visits to key areas involved in the study.

Certain problems were encountered during the investigation. First, searching through government records was very difficult due to their poor arrangement. After being identified, the concerned individuals did not always prove useful because not all were willing to give the required information. However information available provided enough data to carry out the assigned tasks.

-7- CHAPTER 2

THE ENERGY SCENE

The importance of crude oil imports means that there are very strong links between the energy sector and the economy. Therefore, these links must be discussed as a background to the energy scene of the country. The institutional framework for energy is included in the discussions to give a better understanding of the various decisions that were made.

2.1 ENERGY AND THE ECONOMY

The two energy sources of direct interest of this project form the major links between the energy sector and the national economy. Crude oil is imported. It continues therefore to have a growing importance in the national economy because of the rising prices and the state of the country's foreign exchange earnings. The development of hydro power is seriously affected because the national economy cannot support the huge capital outlay needed to implement plans in this area. Before discussing interactions between the economy and these energy sources, it is necessary to look at certain basic economic indicators.

-8- Table 2.1, which gives some of the economic indicators of the country for the past 5 years, clearly shows that the economy of Sierra Leone is in crisis. The annual growth of GDP is 1.51% and per capita income has been declining in recent times by about 1% annually. On the whole, the economy can be described as deteriorating. The country is therefore finding it difficult to pay for the crude oil it needs to keep the various sectors of the economy operating. Table 2.2 shows crude oil imports and their relationship to imports and exports of the country. Though it will appear from the table that the exports were rising, this increase is due to the changes in world commodity prices of the various exports. The data show that volume of exports has for a long time been declining. Since 1980, the country has been using about half its foreign exchange earnings to pay for crude oil. With the huge import bill the country has to borrow externally.

The entire transport subsector and all main industries including the power sector depend on crude oil for their survival. Therefore the economy cannot operate without crude oil, and run on the government must ensure a certain quantity of crude oil.

Consequently, the government was forced to cut crude oil imports drastically as shown in table 2.2. Such a measure created serious problems for the social and economic structures of the country. The transport subsector suffered most because, though accurate figures are not available, it is believed that vehicles on the road had increased substantially since 1972. Considering that the imports in recent years were less than 60% of the 1972 total of 300182 long tons (304 984 t), the effect on the lighter distillates (petrol and diesel) used in the transport sector was substantial.

-9- Between 1973 and 1974, there was a 17% to 22% drop in the volume of crude oil imported. This was due to the sharp price increases in that period. As the economy worsened, only 52% of 1972 figure was imported. Though some improvement was shown in later years, imports dropped again in 1985 to 53% of the peak figure. This reduction cannot be attributed to energy conservation measure~ it merely illustrates the country's inability to pay for the crude oil it needs. As mentioned earlier, this reduction has caused serious fuel shortages that have affected most of the subsectors of the economy (Davidson, 1986}. Some of the effects are:

Housewives are forced to switch from commercial fuels to charcoal and firewood, a move that increases the demand for these fuels.

Shortages of fuel for electricity production have caused frequent power cuts, hence serious consequences in the household and industrial subsectors.

Industrial production dropped by 50% in certain areas and some smaller concerns have closed down, mainly due to lack of electricity.

Private electricity generation, which can only be a drain on the economy, has increased significantly.

Public transportation has suffered the most. Prices have risen over 400%. Private owners and drivers of official vehicles use their cars as taxis.

-10- The number of fire hazards has increased due to storage of petrol in residential homes.

·There have been several responses to these problems by the government and the public that will be discussed later in the report.

With this background, which illustrates the interactions between the economy and the energy sector, the general scene is presented on energy sources, the institutional framework for energy, energy production and energy consumption.

2.2 ENERGY SOURCES

At present there is no energy source map of the country. Therefore the discussions will be based on several research reports from the University of Sierra Leone, and the government. The energy sources of the country can be classified into non-renewable and renewable energy sources. They are discussed separately.

2.2.1 Non-Renewable Sources

The non-renewable energy sources that have so far proved to have commercial potential are lignite and crude oil.

-11- In 1944, the government's geological department identified lignite deposits at an area, Yema, 42 km from the capital, Freetown. Later studies showed other deposits at Songo, Masanke and Kenema. Although exact figures are not yet known, reserves are estimated between 7000000 and 1 000 000 tonnes (UNDP, 1980). So far, observed significant clay deposits have been along with the lignite, which can increase the cost of excavation. This source is yet to be widely used.

The government of Sierra Leone has since 1979 entered into several agreements with oil exploration companies to seek crude oil in the southwest of the country. Drilling actually started in 1982, but there has been no official statement on progress. This matter is discussed later in the report.

2.2.2. Renewable Sources

Solar energy, biomass and hydro sources are the three main renewable energy sources that could be exploited. There is wind in a few scattered places, but it is not a very attractive energy source. Wind speeds are generally low, averaging 2-5 m/s and so its energy potential is limited.

Solar energy is in abundance because of the location of the country, but to use this source requires detailed radiation data for all parts of the country. Such information does not exist at the moment. Attempts have been made by Sheriff (1982) to provide radiation data for

-12- selected parts of the country using mean monthly temperatures and other climatic data to estimate radiation intensity. A more detailed study will be necessary to use this energy source. An average value for radiation intensity in the country is given in table 2.3.

Biomass is the major energy source in Sierra Leone, especially for households, and it has great prospects because Sierra Leone is an agricultural country. Because of the large quantity of tropical forest available, wood has been the main source of fuel for a long time now. Unfortunately, the rate of depletion of this source far exceeds its replenishment rate; indeed, replenishment is so small that it can be considered as non-existent, while the intensity of use has greatly accelerated in recent years. A study is needed to estimate the quantity of standing biomass in the country; however preliminary studies by Atlanta (1976) stated that only 9% of the total land area can be described as forest. Atlanta also estimates that more than 90% of the trees that are felled are for fuelwood. The plantation programs recorded covered only about 220 hectares. There are significant quantities of agricultural and crop residues available, and a recent report by Massaquoi (1986) stated that more than 2 million tonnes of oil equivalent exist in the form of animal waste, straws, sawdust, cocoa pods etc. At present the use of these sources is very limited.

The country has several rivers that could be exploited for hydro-electric power, but only two hydro plants have so far been in operation, one of 2.5 MW and another of 4 MW. Lack of a complete hydro source map, seasonal variations and inability to finance the huge capital outlay form the major

-13- constraints to the development of the enormous hydro potential in the country. At present 21 sites have been located that are each capable of producing power of over 10 MW, and the total potential is estimated to exceed 1150 MW (Davidson and Kamara, 1981 ). Table 2.3 summarizes the various energy sources in the country.

2.3 INSTITUTIONAL FRAMEWORK

As a response to the energy crisis of the early 1970s, the Sierra Leone government formed the Ministry of Energy and Power in 1974, its main function being to coordinate all energy activities nationally and liaise between the government and the energy supply industries. However, other ministries are also involved in managing energy activities in the country. Hence, the Ministry of Energy and Power is finding it difficult to coordinate all the energy activities going on. At present, five other ministries are involved. They are the Economic Development and Planning, Finance, Trade and Industry Mines and and Forestry Ministries.

The Ministry of Economic Development and Planning is responsible for project formulation and development especially where foreign contributions are involved: as all energy projects do have foreign involvement most of them go through the planning ministry.

The Ministry of Trade and Industry has recently been very important in the energy sector because it is now responsible for procuring all the country's crude oil: also it is supervising the activities of the petroleum refinery and more recently has been involved in the distribution of the refinery's products.

-14- Crude oil imports are paid for by the , under authorization from the Ministry of Finance. A joint committee of the Ministry of Finance; Ministry of Trade and Industry and the refinery decides on the prices of the products of the refinery.

The Ministry of Mines is responsible for monitoring oil exploration activities, though negotiations are carried out by a committee of this ministry, the central bank and the customs service. Responsibility for operations rests on the geological division of the ministry.

All crude petroleum imported is refined by the Sierra Leone Petroleum Refinery Company (SLPRC) into gasoline, kerosene, diesel oil, fuel oil and liquified petroleum gas (LPG). There will be further discussion about SLPRC. The refined products are sold to four companies -- Shell, Texaco, Mobile and National Petroleum (NP) for sale to the public.

All the forest reserves in the country are managed by the Ministry of Agriculture and Forestry under the Chief Conservator for Forests. Inadequate infrastructure and lack of suitable manpower limit this ministry in performing the duties necessary to manage forest reserves effectively.

The activities of the Ministry of Energy and Power are at the moment concerned with the distribution of water in the provinces and electricity production and use. The latter is largely carried out by the National Power Authority (NPA), which will be discussed later. Because of the development of the Bumbuna hydro project, an authority was formed within the ministry known as the Bumbuna Hydro Authority.

-15- NPA is in Sierra Leone the sole authority for the production and sale of electricity to the public. Because it cannot meet the national needs of the country, has extended rights to the mining companies to produce the electricity they need. Constant load shedding and break­ downs have led to the operation of a large number of private generating installations in industrial and commercial concerns and some households in the country.

There is no formal management structure for the production, supply and distribution of fuelwood and other renewable energy sources.

2.4 ENERGY PRODUCTION

It is necessary to discuss the various ways in which the primary energy sources are converted into secondary sources, because this will help provide the background to certain decisions made in the energy sector. Areas covered include the movement of crude oil, electricity production, fuelwood distribution and agricultural waste utilization.

2.4.1 Crude Oil Movement

SLPRC, the sole producer and supplier of pe~roleum products in the country, was commissioned in 1969, and the refinery was built by Nissho and Nigata engineering companies at a cost of US$ 6 million. The government owns 50%, the remainder being owned by the various oil companies. It has an annual capacity of 700 000 m tonnes.

-16- The refinery was designed to operate on Nigerian light crude at throughputs of between 4000 and 10 000 barrels a day (2926 t/d to 7315 t/d). It has a tank capacity of 10.1 million gallons {46 OOOm3) of which 3.5 million {16 000 m3) is for storage of refined products. Capacity utilization of the refinery is 32% to 44%.

The products from the refinery are gasoline {47%) kerosone, which includes aviation spirit, {19%), diesel oil (33%), fuel oil (28%) and LPG (less than 1%). It also produces naptha, which is used by local factories. The petroleum products from the refinery are sold to the various oil companies, which specialize in some products--Mobil in diesel oil, National Petroleum in fuel oil and Shell in marine bunker fuel: all the companies have equal shares in gasoline and kerosene. At present, it is estimated that the transport subsector consumes about 42% of these products, residential 24%, mining 12%, industrial and commercial 13%. NPA consumes more than half the diesel oil and a similar proportion of the fuel oil that is consumed by the industrial and commercial subsector. The various products from the refinery from 1975 to 1985 are given in Table 2.4.

Usually, the oil companies sell gasoline, diesel oil, kerosene and LPG to dealers that operate the pumping stations that in turn sell to the public.

2.4.2 The Power Subsector

NPA has been mandated by the government to supply electricity to all parts of the country. It supplies the

-17- western area that houses the capital, Freetown, from the biggest power station at Kingtom and provincial towns from local generators. NPA succeeds the Sierra Leone Electricity Corporation (SLEC) and is wholly owned by the government. It is run by a non-executive board of directors appointed by and responsible to the Ministry of Energy and Power.

The total installed generating capacity of the country is about 114 MW, of which 107.6 MW are thermal plants; two small plants of 2.4 MW and 4 MW are hydro. The 2.4 MW plant is situated at the water supply plant in Freetown, while the 4 MW plant has just been commissioned; it was built by the Chinese. NPA has only 70 MW of the thermal plants, and the mining and other industries have about 37.6 MW. A more detailed study is needed to establish the extent of private generating in the country. It is at present estimated that the industrial area in the capital alone has about 9 MW within the various industries.

At present, 20-25% of the country's population live in the towns and about 10-15% have direct access to electricity. About 80% of the power generated by NPA is consumed in the western area by just over 20 000 consumers. The remaining 20% serves the provincial towns. Power generated in 1982 was 155 GWh but dropped to 112 GWH in 1984 owing to several technical problems at NPA. It improved to 148 GWh in 1985 but is still lower than in 1982. NPA has estimated an annual growth rate of 4.6%, but because of the frequent breakdowns and the unreliability of supply that the country is now experiencing, it is difficult to estimate correctly.

-18- 2.4.3 Fuelwood Subsector

Fuelwood is normally obtained from the forest and woodlands of rural areas. The trees are either felled by axe or burned while preparing for farming. Detailed studies are necessary to establish the contribution of burned wood from farms to the total fuelwood consumed in the country. It was estimated by the Atlanta study (ECA, 1979) to be up to 50% of the total. When these trees are cut, they are left to dry and then further cut into logs, which are made into bundles of about 5 kg. Those used in the Freetown area are made into different bundle sizes varying from 6 kg to 34 kg. Burning trees is very common in the provincial areas because of shifting cultivation: it is a very popular method for bush clearing by peasant farmers.

Charcoal, a fuel source mostly used in urban areas, is produced by burning felled fresh fuelwood in dug pits in a restricted-air environment. These pits are usually about 3 m deep, 6 m long and 2 m wide. The logs are stacked in the pit and covered with grass and soil, with a small hole at the front for ignition. The slow-burning process takes up to 3 days, then charcoal is removed and placed in sacks for distribution. These sacks normally weigh between 5 kg and 54 kg. There are a few areas where burning is carried out on the surface rather than in pits (Davidson, 1985: Davidson and Davidson, 1986).

-19- 2.4.4 Utilization of Agricultural Wastes

There are few major uses of agricultural wastes in Sierra Leone, apart from the use by a few rural households. These major uses are in palm kernel plants and a wood processing plant. The palm kernel shells are used to power boilers, which in turn produce steam for plant processing and electricity production. This takes place in three plants in the country, each having a capacity of more than MW. A 1.5 MW plant is running on wood waste at a wood processing plant in the eastern part of the country.

Though animal waste is not widely used, there are two biogas plants are in operation that were developed from research projects at the university -- an 8 m3 digester plant that generates energy to run a small poultry farm and 3 another 250 m digester plant that supplies part of the energy requirements of rural integrated village program some 30 km from the capital.

2.5 ENERGY CONSUMPTION

It is difficult to compute energy consumption data in developing countries because of the general inadequacy of data, which even when available are largely disorganized. This is a major constraint to energy planning and management in developing countries. However, the situation in Sierra Leone has been greatly improved by a study of the total energy of the country. In this study an energy balance sheet for 1982 is available (Davidson and Davidson, 1984).

-20- The results from a survey of all consuming sectors form the basis of the balance sheet. Table 2.5 gives the overall energy balance for all the various sub-sectors and the different fuel used. Table 2.6 illustrates differences in end uses for the important energy-consuming subsectors.

From table 2.5, it can be seen that more than 50% of the commercial energy is used by the transportation sector, but if the non-commercial energy sources are considered, the household sector becomes dominant. This is mainly due to the excessive use of fuelwood to satisfy cooking needs, as can be seen from table 2.6. The relatively low efficiency generally associated with the devices that use fuelwood also contributes to the large amount of primary energy consumed in the household sector. The striking features that can be noticed from table 2.6 are the differences between rural and urban areas. The diversity in fuel sources used clearly seen in urban households is absent in rural households. Also the energy scene of rural households is dominated by non-commercial sources, a situation that is different from urban households.

It can be noticed that road travel is very significant compared to the total, the reason being that sea and air transport are very limited. The relatively high value recorded for sea transport is due to bunkering and not passenger travel. The low level of industrial activity in the country is responsible for the very low contribution by this subsector to the economy. Davidson and Davidson (1984) discuss this in greater detail.

-21- CHAPTER 3

POLICIES AND DECISIONS IN THE ENERGY SECTOR

There is at present no national policy-making body on energy in Sierra Leone, nor is there definite government policy in this area. However, government appreciates the importance of having such a policy and has expressed on several occasions an interest in formulating a national energy policy. Certain steps are at present being taken in that direction; portions of national development plans relate to energy management and development. Also, during the study, various stresses forced the government into certain decisions pertaining to energy. The provisions of various development plans and the decisions and pronouncements by ministries and agencies of the government form the main content of this chapter. The policy-making machinery is briefly discussed to provide a background.

3.1 POLICY-MAKING MACHINERY

Government policies and important decisions are generally made by the Cabinet, or in Parliament. Ad hoc decisions are common, because in most cases the government practises crisis management. However, there is a planning machinery for developing long and medium-term strategies for government goals and objectives.

-22- The planning machinery in the country comprises:

0 The National Planning Council, the apex body for the formulation and implementation of all government plans. The Head of State is chairman of this council.

0 The Central Planning Unit in the Ministry of Development and Economic Planning as the central planning agency. It coordinates, monitors and periodically reviews all development planning activities from other ministries. Its provincial headquarters assist in provincial planning. This unit holds periodic seminars on various aspects of the national economy.

0 Sectorial planning units in all key ministries that help to formulate development programs pertaining to their ministries. They also assist in the preparation of development estimates that are sent to the Central Planning Unit for final preparation.

0 Several bodies such as the Central Statistics Office, the University of Sierra Leone etc. that provide data that are used for planning and for periodic adjustment to existing plans.

3.2 NATIONAL DEVELOPMENT PLANS

There were two national development plans during the period covered in this project. These plans cover 1974-75 to 1978-79 (Sierra Leone, 1984) and 1981-82 to 1985-86

-23- (Sierra Leone, 1974). The latter was modified at midstream and became another plan covering 1983-84 to 1985-86.

Aspects relating to energy in these plans are discussed below.

3.2.1 National Development Plan 1974-75 to 1978-79

Government's policy according to this plan was to make electricity cheap and available for industrial, commercial and household users. It was further proposed to develop the hydro potential of the country to assure an independent and steady supply of electricity and to provide more thermal plants to take care of increased demand.

The objectives in the energy sector of the plan were:

0 To increase the reliability of service in the western area by modifying the cooling system at the main power station and to secure additional facility of at least 10 MW.

0 To extend electricity to villages and communities around the western area within 16 km of the capital and strengthen interconnection between stations.

0 To rehabilitate old plants in the provinces and construct or reinforce the distribution systems and to promote a moderate program for rural electrification.

-24- 0 To implement phase I of the Bumbuna hydroelectric scheme, a guaranteed supply of 46 MW and the Dodo hydro project for a supply of 3.5 MW.

0 To carry out further investigations for potential hydro sources to be used for electricity production.

The expected expenditures of this program (in SLL 000 000) were:

Modifying the Kington power station 1 • 1 2 and new plant

Extension of services to communities 0.10 and villages within 16 km of Freetown

Strengthening of interconnector capacity 1.0 between substations

Replacement of old plants 0.235

Extension of new areas in the provinces 0.908

Bumbuna hydro scheme phase I 46 MW 31.445

Goma hydroelectric project 3.5 MW 3.4

TOTAL 38.21

-25- These requirements were expected to be financed from domestic and foreign sources, with SLL 11.433 million from domestic sources. It was hoped that government and other public sources would contribute SLL 10.313 million and the electricity corporation SLL 1.12 million. The SLL 26.777 million was expected to come from foreign bilateral and multilateral loans. In order to improve the revenue capacity of the corporation, the government proposal to strengthen its budgetary control system and moderately increase tariffs to consumers. The government intended to use all efforts to reduce losses in the system, which varied between 21% and 50% for different production centres.

3.2.2 National Development Plan 1981-82 to 1985-86

Energy was not clearly highlighted in this plan, as it was in the later revised version, but was discussed in the infrastructural sector. However, under this section various statements were made of the government's intention to develop indigenous energy sources. The plan went on to outline other intentions during the plan period; policies in the energy sector were to be a combination of regulations, pricing and public investment decisions. The aim was to reduce dependence on oil and develop alternative energy sources. For biomass, the government intended to promote plantation programs for fast-growing tree species in selected areas in the country. Studies were proposed to enable government to harness solar energy and lignite. The use of lignite was to be vigorously pursued in thermal power generation to be used as a supplement during the dry season when low output is expected from hydro plants.

-26- A revised version of the plan, covering 1983-84 to 1985-86, included an investment program in addition to the objectives already outlined. The investment program, which concentrated on the development of electricity was proposed with two objectives in mind: reduction of dependence on fuel oil for power generation by developing hydro power and reduction of numbers of small generating sets by constructing transmission lines connecting neighbouring consumption centres. The priority needs were to repair the Kingtom facility, to develop the Bumbuna and Goma hydro projects and to improve financial management of NPA.

It was stated in the plan that the and the Organization of Petroleum Exporting Countries would support by credits and loans the repair of the generators at Kingtom, provide a new cooling system at Kington and supply technical assistance for NPA. The exercise was expected to start preliminary work and construction of the Bumbuna hydro project in 1984 to produce 71.5 MW at a cost of US $250 million. The Chinese were expected to finish during the plan period the construction of the Goma hydro project, which will be capable of producing 4.4 MW in the rainy season and 0.5 MW in the dry season.

The proposed program for NPA would consist of:

0 Installation of an additional 9.2 MW in Freetown until the Bumbuna project is completed.

0 Completion of a 33 kv distribution network in Freetown.

0 Installation of a mini hydro plant at Kabala.

-27- 0 Installation of additional plants at Bo and Koidu.

0 Extension of provincial distribution.

0 Completion of studies for hydro scheme at Gandorhum, near Bo.

0 Continued investigations into the proposed Mano River Basin Development project.

3.3 MAJOR DECISIONS IN THE ENERGY SECTOR

The major decisions made by the government in the energy sector can be classified into four different sections. These are: the petroleum subsector, the power subsector, the institutional framework and other areas, which include energy conservation and forestry. The ensuing discussion will follow that pattern.

The following documents were consulted to obtain the various decisions, because there is no single document that contain them all:

0 Presidential speeches from the throne, usually delivered at the start of every Parliament ••

0 Annual budget speeches by the Minister of Finance.

0 The laws of Sierra Leone and amendments.

0 Various other documents from the government.

-28- 3.3.1 The Petroleum Subsector

The major decisions made in the petroleum subsector were on crude oil exploration, procurement of crude oil and pricing of petroleum products. The decisions are:

1. In 1970 the government of Sierra Leone granted oil exploration licences to Clinton International Corporation, Inter-Ocean Oil Company Inc. and Occidental (SL) Inc. to cover the seabed and subsoil of the territorial waters and continental shelf of Sierra Leone.

2. In 1974 the minning laws of Sierra Leone were amended to encourage oil exploration. Certain incentives were built.

3. In 1979 the government enterred into an agreement with Araca Petroleum Company and Exco International for exploration along the coast.

4. In 1980 Araca Petroleum Company started exploration in the country.

5. In June 1981 results of a seismic survey by Araca Petroleum Company and Exco International were submitted to government, and they were given permission to start drilling on a site located by the consortium.

6. In 1982 the government ratified the oil bill that was three years in formulation.

7. In 1982 the government ratified several exploration agreements under the new oil bill. These agreements included two US companies, Excco International and Aracca Petroleum, Mobil Exploration (SL), and a group headed by Rickleson Oil and Gas company.

-29- 8. In 1984 petroleum product prices were increased on the average over 100%.

9. In 1984 the government signed an agreement with Amoco Petroleum Company to carry out a seismic survey including onshore investigation.

10. In 1986 petroleum products prices were increased over 400% on the average.

3.3.2 The Power Subsector

The decisions made in the power subsector were either to improve the electricity supply or to develop hydro potential.

1. In March 1972 the government of Sierra Leone entered into agreement with a consortium of consulting engineers, Salini, and Techsult to carry out field surveys, technical investigations, economic studies, feasibility studies and the preliminary engineering for the development of a complete and efficient hydroelectric scheme at Bumbuna Falls for an initial installed capacity of approximately 50 MW and transmission line network. This was done following the UNDP power development report, made public in 1972.

2. In June 1972 the government provided SLL 100 000 in the budget for the completion of the Bumbuna hydro feasibility studies.

-30- 3. In November 1973 the government of Sierra Leone and the People's Republic of signed a protocol for economic and technical cooperation including energy.

4. In June 1974 the government of Sierra Leone awarded a management contract to a German firm to manage Sierra Leone Electricity Corporation (SLEC).

5. In May 1975 the government of Sierra Leone signed a supplementary agreement to the March 1972 agreement above with the same consortium for further studies for a technical appraisal of the project, together with World Bank, with the hope of reducing the overall cost.

6. In May 1975 the government of Sierra Leone entered into agreement with Giorgio Pietrengeli consulting engineers to carry out a review of existing studies and conduct supplementary ones to enable the government to identify the most advantageous option.

7. In 1976 following a survey by a team from the People's Republic of China on the power supply at the Kenema District, a "minutes of talks" for the power station was signed by the governments of Sierra Leone and the People's Republic of China.

8. In 1976 a fourth generating unit was installed at Kington power station.

9. The government received assistance from the to upgrade the lighting system at the international airport.

-31- 10. A contract was signed between the government of Sierra Leone and Oscar Von Miller to investigate and provide solutions to technical problems in electricity production and distribution at Makeni and Magburaka.

11. The government acquired a generator from the German government for DEM 5 million.

12. In 1979 the government acquired a DEM 4.25 million suppliers' credit for a 11 kv distribution network.

13. In 1979 the government received a loan of US $ 7.85 million from for purchasing a 9.2 MW generating plant.

14. In 1981 the government acquired a generating set for the Kington power station.

15. In 1985 the government acquired generating plants totalling 12 MW from Europe at US $6 million.

16. In 1985 Danida, the Danish International Development Agency, approved $9.0 million for MW unit and a distribution network in Bo and a distribution network in Kenema.

17. In 1986 the Goma hydroelectric plant went into operation.

-32- 3.3.3 Institutional Decisions

Institutional decisions were mainly to do with the increased government intervention in the petroleum sector and greater control of energy sector in general.

1. In 1972 the first meeting of the National Planning Council was held and chaired by the head of State.

2. In 1974 the Ministry of Energy and Power was created and the first minister appointed. Its mandate was to be the primary organ for the government on energy.

3. In June 1976 regional planning offices were set up at Bo, Makeni and Kenema.

4. In 1980 the government set up special resource committees to review and make recommendations for the development of major productive sectors, and energy was the focus of one of such committees. The main objective of this committee was to formulate a package of policies for medium-term development acceptable to the International Monetary Fund and other international bodies.

5. In 1981 an ad hoc national energy committee was formed in the Ministry of Energy and Power. The committee comprised government officials, university researchers and members for industry.

6. In 1982 the Cabinet formed a national energy conservation committee to develop policies to ensure reduction in the use of crude oil in order to save foreign exchange.

-33- 7. In 1982 the refinery (SLPRC) closed down for 10 weeks because of disagreement between the oil companies and the government over the supply of crude oil.

8. In 1982 the government bought crude oil from Iran and sold it externally; proceeds from this transaction were used to buy refined products for local consumption.

9. In 1983 the Cevil Trading Company was formed and became the supplier of crude oil to the country.

10. In January 1985 British Petroleum (SL) Ltd. pulled out of the country and its assets were bought by the Sierra Leone government (60%) and a local company, Precious Mineral Mining Co. (PMMC)(40%); the management contract went to PMMC.

11. In 1984 the Ministry of Energy and Power supported research at the university on new and renewable energy sources.

3.3.4 Other Areas

Other decisions made by the government were mainly on regulatory measures that neither could help to reduce energy consumption in the transportation sector or were to do with forestry and could affect the fuelwood supply.

1. In 1975 the Ministry of Transport and Communications restricted all government vehicles to using 9 L/d fuel.

-34- 2. In 1975-76 customs duties on cars with engines 2 L or more and costing more than SLL 10 000 were increased from 60 to 120%.

3. In 1981 the government increased customs duties by 75% and 100% for luxury cars with engines of 2 L and 2.5 L respectively. Registration for luxury cars went up by 50%.

4. In June 1981 the government planted more than 6000 ha of trees.

5. In June 1981 the geological survey division of the Ministry of Mines was asked by the government to evaluate lignite deposits in the Koya Chiefdom (some 60 km from the capital).

6. In 1981 forestry projects were identified for feasibility studies by the European Economic Community, the Food and Agriculture Organization and Tate and Lyle for industrialization projects at the approval of the government.

7. In 1985 National Tree Planting Day was observed June 5. It was a decision by Cabinet and implemented by the forestry division of the Ministry of Agriculture and Forestry. Aureol Tobacco Company, a subsidiary of the multinational British American Tobacco Company, gave significant financial support to the venture.

8. In 1986 several decisions were made to conserve energy use in the petroleum sector (this will be elaborated later).

-35- The various decisions listed above can be summarized as follows;-

0 Ensuring an adequate supply of electricity in urban centres and extending it to rural communities if funds are available.

0 Promotion of the Bumbuna hydro project in order to have a reliable electricity supply base.

0 Reducing the crude petroleum import bill.

There was very little in the decisions to do with the development of biomass energy. The forestry feasibility studies were to help the timber industry and not carried to solve the fuelwood problem. In 1984, a generating plant using wood waste of 1.5 MW was installed, but this plant was not the result of insistence by the government but an initiative of the German firm, KFW. Even the decision by the government to accept tree planting as a regular event was developed out of FAO's request for national plans for the 1985 international Year of the Forest. However, the forestry division should be commended because, apart from organizing the tree planting ceremony, which was attended by the Head of State, it also had essay competitions for schools and radio lectures all over the country. It is hoped that this event will continue; it was repeated in 1986 but on a smaller scale. The next chapter provides detailed discussions on the decisions in the petroleum and hydro subsectors.

-36- CHAPTER 4

FACTORS UNDERLYING POLICIES AND DECISIONS IN THE PETROLEUM SUBSECTOR

A vivid aspect of most of the decisions taken in the all the energy subsectors is that they were ad hoc and emergency in nature; hardly any baseline studies were carried out before embarking on these decisions. It is the purpose in this chapter to try to identify some of the factors that may have cause the government to take them. This chapter will concentrate on the petroleum subsector, and the next chapter will look at the hydrosector.

The ensuing discussion will concentrate on decisions made in crude oil exploration, crude oil procurement, production of petroleum products, distribution and marketing of the products, the pricing of the products and conservation measures in the petroleum subsector.

4.1 CRUDE OIL EXPLORATION

Interest in exploring for crude oil in the country started as early as the 1950s during the colonial period. This interest emanated form the belief by the colonial government that a crude petroleum belt existed along the west coast of Africa, starting from the coastal waters of Senegal and stretching to those of Nigeria and Cameroon.

-37- The successful exploration in Nigeria and the benefits that oil-exporting countries were realizing prompted most countries with some prospects to embark on oil-exploration activities along their coastal waters. It was for the same reason that the government of Sierra Leone went into an agreement with Clinton International Corporation, Inter Ocean Oil Company Inc. and Accidental (SL) Ltd. for exploration along its coastal waters. Preliminary investigations by these companies indicated little prospect.

During the second oil price shock in the late 1970s, most of the financial institutions in the world were more willing to commit risk capital for oil exploration in developing countries. These activities did not prove successful in all cases, but cerain countries were able to confirm that their deposits were commercially exploitable. It was during this period in 1979 that Sierra Leone entered into an agreement with Araca Petroleum Company and Exoco International Inc. for off-shore exploration in the south-eastern shelf, an area believed related to the expected deposits of nearby Liberia. These companies got licences in 1979 and 1980 started seismic surveys along the coast. According to the Government of Sierra Leone's National Development Plan 1981-86, it was reported that in May 1981 some oil was found in the Turner's penniusular but no figures were released. Although this report was very scanty it could have led to the ratification of the oil bill, which was delayed by three years. The contents of the bill will be discussed later but it should be noted that up to this point there was no financial commitment by Sierra Leone government. In 1981 the Exoco group assigned the work to Mobil Oil, one of the local companies responsible for distribution and marketing of petroleum products in the

-38- country. It is believed that there was a strong relationship between Araca, the main operator, and Mobil Oil. It is thought that Mobil Oil did not want to be associated with exploration activities in Sierra Leone then, but was prepared to be involved only at a later date when there were signs of possible commercial exploitation. Mobil Oil drilled the first well, which was later abandoned. Although details were not made public it was believed that samples were taken away to the parent company for laboratory testing. In 1984, the government entered into an agreement with Amoco Petroleum Exploration Company for seismic survey and exploration activities. Shortly after this, Mobil Oil pulled out. Amoco drilled a well in 1985. The results were not made public, but it is believed that they were not encouraging. The company left in 1985, and it has been reported that it may restart drilling in October 1987.

Under the oil bill that was ratified by the government in 1982, the oil exploration companies should incur the full cost of exploration and pay the government a 12.5% royalty on all crude produced. Two important comments about the bill: firstly the bill was delayed for three years and this can have a negative impact on prospective investors; and secondly the government vased its earnings on the crude oil produced because they did not have the capacity to monitor or evaluate the exploration activities, and hence they had to depend on the figures provided by the oil companies.

Apart from the traces of oil found that was reported in 1981, there has been no firm indications of oil been discovered in a scale to convince the need for commercial exploitation. The well that was dug was abandoned as dry, though it was reported by the Government of Sierra Leone's

-39- National Development Plan 1981-86 that data collected from this well when evaluated show prospects of discovery on on the offshore continental shelf.

Amoco is at present drilling in Liberia, where it is believed there are some positive early signs. It may be that Amoco's interest in Sierra Leone is because the prospects in Liberia have a bearing on Sierra Leone waters, which are in the same area. However, during these activities Sierra Leone was going through a change of leadership, and this could affect decisions that are of a high-capital-intensive nature such as oil exploration.

In all these activities, the involvement of Sierra Leoneans, especially in technical operations, have been very limited. Hence this aspect is discussed separately.

4.1.1 Local Participation

Theoretically, it can be argued that Sierra Leoneans were involved from the first exploration, because one of the companies involved then was Occidental (SL) Ltd. This company is one of a group of foreign companies that are registered in the country with dummy local representation (that it, local individual or group with no control or voting rights but that benefits financially). It is believed that similar arrangements were made with Araca. Mobil Oil is an established company in the country and Sierra Leoneans are involved in its normal operations, but none was involved in the exploration work. The situation was different for Amoco Petroleum Company, which was

-40- introduced to the government by a national who later became the Company's agent and facilator. The role of the agent is not very clear but it seems he had little to do with ~xploration activities. However, the agent was instrumental in organizing a small team of local geologists and chemists to work with the company but their involvement was very limited, as was government involvement.

The geological surveys of the Ministry of Mines, expected to monitor exploration, are far from equipped to carry out the tasks involved. The exploration companies, realizing this inadequacy, exploited the position by allowing government inspection but not providing space on their exploration vessels. This prevented evaluataion or monitoring of their activities.

The government did send a geologist for further training in advance techniques of oil exploration, but for this person to be useful the necessary support structures must be provided.

For Sierra Leone to realise any benif its from the activities by the various companies operating in the coastal waters, an effective evaluating and monitoring team must be set up. A person trained in advanced techniques can be the nucleus of such a team and the team must be provided with the neccessary support facilities. Without such measures the country will find it difficult to benif it from the operations and would have to depend on the results provided by the oil companies.

-41- Another aspect that must be mentioned is the interest of Amoco exploration company, from the data available it would appear that their main interest is in Liberia were they seem to have more favourable results and will prefer to secure rights in Sierra Leone in case of any future sucess because they seem to form the same belt.

4.2 CRUDE OIL PROCUREMENT

Before the commissioning of SLPRC, the country was importing all the petroleum products needed through the existing oil distribution companies. Since 1970, when the refinery came into operation, the country has been importing crude oil, mainly from Nigeria, platformate, from the Carribean and Europe, and lubricants. Because SLPRC could not meet the demand, about 10% of the diesel oil needed was imported by one of the oil distribution companies, an exercise that was stopped in 1976. Platformate was imported until 1982, when there was a change in procurement arrangement for crude oil.

Up to 1982, the oil distribution companies were supplying SLPRC with crude oil in notation and government was paying these companies for the crude oil in foreign currency. Unfortunately, by 1982 the government was experiencing foreign exchange scarcity and management problems: its obligations for foreign currency were 20 times what was available, and the country therefore was in no position to pay the oil companies for the shipments. Thus the debt of the government to the companies kept increasing. One of the companies, British Petroleum, in mid-1982 demanded that the government pay down US $1 million of its debt if shipments were to continue. This the government was unable to do, and the companies withdrew from

-42- the arrangement. The refinery was then shut down for 10 weeks because of lack of crude oil. By the end of 1982, the government still owed the oil companies a total of US $39 million plus US $4 million for interest. The 10-week stoppage of the refinery forced the government to resort to resort to ad hoc measures to prevent social unrest. During this period, crude oil was purchased from Iran. This could not be processed at SLPRC and so was resold and the earnings were used to buy the petroleum products needed. The relationship between Sierra Leone and Iran is not clear, but this was after the overthrow of the Shah and Iran was looking for friends.

A new arrangement was decided upon by the government. Under this arrangement, the government purchases crude oil through a private company (Cevil Trading Company, registered in Panama) on a 180-day credit from a London bank after a 50% deposit by the government has been made. This arrangement caused serious shortages of petroleum products in the country, and probably contributed to the development of a parallel market in the country.

The price the government was paying Cevil has always been higher than official world market price. For example, the government was paying US $35 a barrel when the world price for Nigerian crude was US $30 (Table 4.2). The table also shows that the government was paying the oil companies higher than the NNPC and the spot price in the last two years for crude supplied.

-43- Since the change of arrangements in the procurement of crude oil, there has been obvious signs of shortages in the petroleum sector. This has occupied the minds of government, mainly due to the inability to pay for the crude oil that was needed. The desperation on the part of the government is exhibited by the government negotiations with several countries for crude oil.

Though it may seem from the above that it was the refusal of the oil marketing companies to supply crude oil that led the government into procurement of crude oil, there had been repeated calls in some government speeches for a change in the arrangements in the procurement of crude oil.

4.3 PRODUCTION OF PETROLEUM DERIVATES

The activities of SLPRC, the sole producer of petroleum deriviates, have had a direct impact on the policies and decisions made in the petroleum subsector. The company was established by an Act of Parliament that required the government to own 50% of the shares, the remaining 50% being shared equally among BP, Shell, Texaco, Mobil and Agip. When Agip pulled out of the country, its shares were bought by BP. SLPRC started at a disadvantage because they took over the debt of SLL 2.7 million (principal and interest) still owing to Nissho, the construction firm. The act specifies that dividends should be paid in foreign exchange after tax. This has amounted to US $675 000 to 1985, economic problems made it difficult for the company to pay.

-44- The government has always been fully involved in the management of the refinery. The Minister of Finance was made chairman of SLPRC in 1983, after the government decided to take over crude oil procurement. Previously the government nominated a chairman from the public. Though no reason was given for the change, it is believed that the then chairman insisted on maintaining the arrangement with the oil distribution companies. Also the Minister of Trade and Industry holds the shares on behalf of the government.

Therefore both ministers attend quarterly board meetings. There are nine board members of whom five are from the government. The board has powers only on operational matters and investments, not on pricing of the products. This responsibility was allocated to a Pricing Advisory Committee, which will be discussed later.

At present, the refinery is running at a loss because of several problems. The pricing policy of petroleum products seems to be the greatest contributor to this situation. More will be said about this in the later discussion on pricing.

Table 4.1 indicates the company was showing a loss of more than SLL 22 million in 1983 and this has gone up to SLL 58 million by 1985. The inability of the refinery to run as a viable company has created a base for future policy directions, which will be discussed later. However it is important that a few comments are made about the unprofitability of the company. The company receives crude oil from Ministry of Trade and Industry, which pays suppliers in foreign exchange. Prior to each supply of crude, the company is advised by the Ministry of Trade and

-45- Industry about the price. In most cases it is above world price, $260 or $285 per long ton (=1.016 tonnes) instead of the world price of $245. Table 4.2 illustrates the differential between the price the country pays and the world price. Another factor has been the difference in exchange rates. When this agreement was made, the exchange rate was SLL 1.25 to the US dollar; now it is 6 SLL. Thus the cost of crude oil to the refinery has quadrupled. The government instituted tax on the value of the crude, which yielded SLL 6.8 million in 1981 and SLL 4.8 million in

1982. Furthermore, the company is required to pay its shareholders in foreign exchange; as it is unable to do so, that the foregone payments show up as liability to the company.

BP enjoys three special benefits from the company that other companies do not because it originally had the management contract. These amount to SLL 47 000 for technical and administrative support (which is on-going), 4% commission on the value on any purchases it makes for SLPRC, including spare parts and payment for specific technical services such as annual inspection and overhaul of the refinery.

4.4 DISTRIBUTION OF PETROLEUM PRODUCTS

The distribution and marketing of petroleum products has been the sole responsibility of the distribution companies that own shares in SLPRC.

-46- By the end of 1983, BP decided to close down its operations, which were bought by the government and a private company, the Precious Mining and Metal Company (PMMC). No reason was given for the pullout by BP, which was a surprise, especially because it was after BP acquired the interests of the Sierra Leone Selection Trust (a company that has 49% in a diamond minning concern and has the management contract). However, during this period there were three points about BP that may be connected with the pullout:

0 The escalating debt owed to them by the refinery and government; BP also was supplying fuel to NPA which also owed BP SLL 2.5 million. Other government departments also owed BP SLL 0.8 million.

0 BP was apparently unhappy with the government arrangement to the procure crude oil.

0 BP was expanding in other parts of the world and Sierra Leone then was in a very bad financial position.

The government purchased 60% of the shares of BP's local subsidiary, and the remaining 40% was bought by PMMC (a local company that bought all the other BP interests). A board was formed for the BP operation on which the government nominates 6 sponsoring ministry. This directly involved the government in the distribution and sales of petroleum products.

-47- 4.5 PRICING OF PETROLEUM PRODUCTS

The SLPRC Agreement (1972) Ratification Act, clause 11, gives the right to the Pricing Advisory Committee to adjust the prices of petroleum products annually if revenues are inadequate to cover costs. The government has a casting vote in the pricing committee. This committee comprises two government representatives and two from the marketing companies. The committee should recommend to the refinery the prices of its products, but owing to the sensitive nature of these products, prices the government intervenes frequently, so that the duty of the committee has been to recommend to the government appropriate action.

This arrangement of government intervention in the prices has rendered the price of the petroleum products not in keeping with the rising cost of crude oil. The policy of the government on prices has always been based on social consideration, not on the strict rules of economics. The main aim--which is common for most west African countries--is to keep kerosene very low-priced because it is used mostly by poor people and make petrol high-priced because it is used mostly by high-income groups in private cars. Diesel fuel, which is used in most public vehicles, is in the middle of the price range.

Apart from these general points, Tables 4.3 and 4.4 provoke certain specific points:

The dominant factor has been the rise in crude oil price, as is shown in Table 2.2 especially in 1973-74 and 1979-80.

-48- Table 4.3 shows that the government has consistently been trying to protect users from the full impact of the increases in crude-oil price by reducing the excise duty in real terms and squeezing market profits over the period under review. The result is that, while the price of crude has risen three times faster than the consumer price index, the price of the products remained in line with the consumer price index.

To a large extent the government has been controlling the prices by adjust~ents in cross-subsidization among the products. Prices are set to suit overall policy objectives and social consideration, with the priviso that overall income must cover the cost of refining and distribution.

Generally, it has been the government's policy to keep the price of petrol the highest among the products, though in US dollar petrol is the cheapest in Africa; it has increased none the less from far less than US $0.22/L in 1971 to US $0.44/L in 1986. The government have been closing the gap in the price differential between petrol and diesel oil from 28% in 1971 to 15% in 1986. A major shift recently has been on the price of kerosone. The price of this product has become very high (Table 4.4). This fuel is used mostly by the poor and less privileged, hence such a move departs from the social considerations advocated previously by the government, a move that may have been due to advice from the International Monetary Fund.

Continuous pressure from marketers to increase their share of the price of petroleum products caused the large increase in their share during 1985-86. For petrol, the increase was from 6% of the total value to over 18%. Up to 1986, the government allowed the marketers different

-49- markups for each product but in 1986 all the products were allowed the same markup. Hence for kerosone 23% of the total price now goes to the marketers.

The developments described in the preceding paragraph do not include fuel oil, because the sales pattern is different. The largest local user is the NPA which uses fuel oil for producing electricity. The other main use of fuel oil is for bunkering. The price is normally arranged by contract between the supplier and the recipient. The market for bunker fuel has not been steady, nor generally has it been good, except during the Falklands war when several boats from Britain were fuelled.

Despite price increases, the products have been scarce, which has led to parallel marketing of all the products except fuel oil. The street price can vary from two to three times the official price. The shortages have led to several government measures, which are discussed below.

4.6 ENERGY CONSERVATION MEASURES

The severe scarcity of foreign exchange that the national economy is experiencing has caused serious difficulties in the energy sector because of the dependence on crude oil, which is imported and needs foreign exchange to pay for it. These shortages have had serious consequences in several subsectors of the economy, especially the transport subsector. Also affected are electricity production, industrial productivity, crime, health and fire hazards and the parallel market for

-50- petroleum products. Davidson (1986) provides a more detailed account of some of these effects.

The government, oil companies and public have responded to these problems.

4.6.1 Response by Government

The main objective of the government measures has been to ensure a more equitable distribution of available products. The specific measures include:

0 A monitoring unit of army and police officers, mainly to check on pumping stations to prevent hoarding by unscrupulous businessmen. Also, during sales a member of the unit is present to ensure equitable distribution.

0 Rationing of petroleum to vehicles and the allocation of stations for particular professions and businesses. No selling on Sundays.

0 Dealers caught selling above the official price lose their pumping stations.

0 Electricity was rationed in most parts of the country.

Though these measures have helped to reduce hardship, problems remain.

-51- 4.6.2 Response by Other Agencies

The main response by the oil distribution companies was to cooperate with the government on the measures outlined above, notably in restricting supply to the various stations and assisting the monitoring unit by regular checking on the stations. The companies also instituted changes in the method of distribution of petroleum products; they directly supplied 200 L to 1900 L per month to various offices and individuals they considered were performing essential services. These included Embassies, industries, educational institutions and government institutions.

The general public has also responded by various measures:

0 Private cars are being used by drivers and owners as taxis to cope with the demand for public transport.

0 People with more than one car only now use one car.

0 Housewives have shifted their cooking fuel from kerosene and gas to firewood and charcoal. This move has increased the demand for these fuels, hence they have been subject to very high price increases in urban areas.

0 More petroleum has been stored in homes; this, however has led to an increase in the number of house fires.

-52- CHAPTER 5

FACTORS UNDERLYING POLICIES AND DECISIONS IN THE HYDRO SUBSECTOR

Since Sierra Loene attained independence in 1961, it has been the policy of the country to supply electricity as widely as possible, because at independence only the western area, which contains the capital, and a few provincial towns (less than 5% of the total population) had access to electricity. This situation contributed to the country's low level of industrialization. It was therefore not surprising that after independence the government advocated the development of a viable power sector. This call was repeated in several government documents, including speeches from Heads of State.

As discussed earlier, indigenous energy resources are limited, and during the colonial period it was attractive for the colonial government to promote the use of petroleum deriatives in the power plants. Hence, at independence, all but one of the generating units were using diesel fuel. The one set not using diesel fuel was a steam plant then capable of producing 2.5 MW. The most plausible option availabe to the government at that time was to utilize the country's vast hydro resources. Therefore in the late 1970s, the government was preoccupied with use of hydro resources in country for electricity production.

-53- The government then approached the Development Programme for asistance to carry out a feasibility study of Sierra Leone rivers to identify those that could be harnassed for producing electricity and to estimate the amount of electricity that could be available from them. Earlier studies had been done on certain rivers, but this study gave very comprehensive information about the rivers that can be harnessed in the country. The results are given in Table 5.1. It shows that over 1000 MW, more than three times the national needs of the country, can be harnessed from hydro, but there are two major drawbacks: wide seasonal variations and the huge capital outlay needed. The study interested the government in the development of the Bumbuna Falls. A later investigation by the Chinese led to interest in developing the Dodo river.

5.1 NATIONAL POWER AUTBORI'l'Y

NPA supplies electricity to the western area, which includes the capital, Freetown, mainly through Kingtom power station, and to the provinces from local generators. It succeeds the Sierra Leone Electricity Corporation (SLEC) that was established in 1964. Due to several local financial and technical problems, the board of SLEC was dismissed and replaced by a 5 year management contract with a German engineering firm, Oskar von Miller. Under this arrangement, the general manager reports directly to the Minister of Energy and Power. Later NPA was set up by an Act of Parliament in 1982 and given the monoploy for electricial power generation, transmission and distribution in the country. It is run by a board that is appointed

-54- directly by the Minister of Energy and Power. Though the Act gives NPA a monopoly its activities are limited due to its inability to produce electricity reliably and its poor financial position. This situation has given rise to several captive plants in industries and private houses, the total capacity of which is well over half that of NPA.

5.1.1 Generating Capability

Only 10% to 15% of the total population of the country has access to electricity. The country's total installed generating capacity is still under 140 MW, though work is needed to establish the exact value, because there are many captive plants now in the country (Table 5.2). The total installed capacity in 1981 was 98 MW of which 95.6 MW was in thermal power plants; only 2.4 MW came from a small hydro plant at the Guma Valley water-supply dam that generates only during the wet season. Table 5.2 gives the situation in 1981. Since then, NPA has added three stations of 4 MW each for the western area and two smaller ones for the provinces of 2 MW each. At present, private plants are estimated at about 25 MW (within the industrial area in Freetown there is private capacity up to 12 MW). Tables 5.2 and 5.3 clearly demonstrate the technical problem at NPA. A third of the installed capacity was not working as of 1981 and the situation has worsened. (Installed capacity is based on ratings, but the firm capacity is the actual available power.) Most of the have been derated mainly due to age and poor performance.

-55- The total power generated by NPA in 1981 was 135 GWL but this value dropped to 103 GWh in 1984 and has continued to drop since, mainly due to lack of fuel and frequent breakdowns. Another problem is the losses in the distribution system. For example in 1984, NPA produced 146 Wh, of which only 103 GWh was sold and estimated losses amounted to about 22 GWh.

However if the existing plants are rehabiliated and adequate provision for spare parts is made, NPA's generating capacity could rise by 40%, which would substantially change the situation.

5.1.2 Financial Performance

It is difficult for NPA to have a firm financial base because of its many problems, such as losing up to 24% of the power produced. There is no promotion, and the quality of the suply is far from good because of frequent shut-downs. Hence there is a serious crisis of public confidence.

This is manifested by (NPA's) nickname - ("no power at all"). Another problem is the pricing system. The government, does not always approve the request by NPA to increase tarifs because of social consideratiobns, but has recently approved a substantial increase, mainly because of pressure from the World Bank, which demands a 10% return on fixed assets. Unfortunately, NPA's record of revenue collection is very weak because of the inadequacy of meters and lack of meter spares. The present billing procedure,

-56- which includes using facilities in a nearby country, and involves a 3-month cycle, also contributes to the problem.

NPA has been incurring losses for a long time (Table 5.4). The present World Bank demand for NPA to achieve 10% return on fixed assets will prove impossible because it would require very large increases in tariffs that are socially and politically unadvisable to the government. The poor financial position has forced the government always to provide direct and indirect subsidies to them as shown in Table 5.5. Therefore the government is always intervening in the affairs of the Authority. The table shows that the government owes NPA, a substantial amount, but the subsidies are also large.

5.2 BUMBUNA HYDRO PROJECT

The Bumbuna hydro project was born out of a survey of the hydro potential of the country in 1970 carried out by Motor Columbus and sponsored by UNDP. The first feasibility study was carried out 1972 by a consortium that did field surveys, technical investigations and preliminary engineering. The government commissioned a further review of the study in 1974. From the results of the review, government approached the World Bank in 1975 for financial and technical support, and the bank provided support for a full feasibility study in 1977, which was completed in 1980. Supplementary financing from OPEC was used to prepare bidding documents in addition to the feasibility report. An engineering consortium was formed to prepare detailed engineering work and prequalification advertising in 1982.

-57- Bids were called in 1983. Tata Engineering Company was given the contract as supervising contractor and came to Sierra Leone in 1983. Preliminary engineering work started in mid-1984, but the project was stopped due to lack of money and has been that way since.

5.2.1 Feasibility Studies

There were several feasibility studies carried out on this project between 1970 and 1979:

(1) A feasibility report by an Austrian firm in which the project was expected to cost US $7 million. According to the report the cost of electricity to the consumer would be only US $0.01/kwh (1970).

(2) A contract was signed 27 March 1972 between the Minister of Development and a consortium comprising Salini Consultants of Rome, , Comstock International Inc. of Toronto, Canada and Tecsult International, Montreal, Canada. They were commissioned to carry out field surveys, technical investigations, economic studies, feasibility studies and preliminary engineering for installing a 50 MW plant and transmission lines. Their report was completed in 1973 (Salini Consultants et al., 1973).

-58- (3) A contract was signed between the government and I.G. Pietrangeli of the Bumbuna Construction Consortium for technical appraisal of the work described in the previous paragraph. The report suggested a phase approach, with a first phase of four generators of 30 MW each (Pietrongeli, 1974).

(4) A contract was signed between the government and the Bumbuna Construction Consortium to review all previous studies and carry out supplementary studies to assist the government to take a final

decision on the project. A report was submitted in 1975 (Pietrangeli, 1976).

(5) The government agreed to a World Bank proposal for a more detailed feasibility study in 1977 to be carried out by Bumbuna Hydro Consultants (Engcon, Tecsult, Edward Davies, Motor Columbus and Pietrangeli). A report was submitted in 1980; the work was funded by World Bank and OPEC (Bumbuna Hydro Consultants, 1981 ).

(6) The government signed a project document with UNDP for management experts to develop the modalities of forming a Bumbuna Project Development Authority; UNDP provided the funds. ESB, a British firm, was appointed by World Bank as management consultants to study the management structure for the power sector of the country and suggested the formation of NPA.

-59- From all the above studies which range from 13 to 5 large volumes per study, it appears that the results of the study done in 1975 could have been used to start construction. The World Bank study in 1980 only confirmed 1975 results and suggested the construction of two dams. Therefore the time between 1975 to 1980 proved to be wasted.

The hydro-electric aims at having an installed power of 305 MW producing an average of 1250GHW per annum. Due to the size of the power output and the initial capital required, the project was divided into phases, with four phases in all. The first phase will have an installed capacity of two 26.7 MW and the second phase will involve a third unit that should bring the total up to 80 MW. The third phase will add an additional 105 MW of installed power and in the final phase three 40 MW units will be added. There has been a recent thought of revising the first phase to single 47 MW unit and other mechanical modifications to reduce costs.

5.2.2 Construction Works

Actual construction work started in 1982-83 by an Italian firm, Salcost, which subcontracted some aspects of the work to a local Italian firm, General Engineering Construction Company (GECC). During the construction work the following were achieved:

(a) Right tunnel excavation. (b) Left tunnel excavation but not completed due to problems in design.

-60- (c) Vertical excavation for spillway. (d) Access road to dam site (48 km). (e) Five bridges across the river. (f) Terrace canal excavation. (g) Eighteen staff houses.

The cost of construction was covered by US$ 20 million provided by the Italian government.

5.2.3 World Bank Involvement

World Bank involvement in the project clearly did not assist progress, mainly because of its mode of operation. Sierra Leone was equipped with enough data to start construction in 1975 when it approached the World Bank. Undertaking another feasibility study, a usual condition for World bank loans, provided very little new information. Also the loan of US$ 2 million in 1977 by IDA was not fruitful. Table 5.6 shows that World Bank's involvement was limited to the financing of various studies. The bank contributed only 18% of the total money spent on the project--US$ 7.344 million. This went on consultants' fees and support services and not necessarily on the support of the project.

The project was stopped in 1983 because a study financed by the World Bank came to the conclusion that the project was not viable. The bank then supported a supplementary study in 1984 to scale down the project. As the table 5.6 shows, only the Italian government has been positive in the project.

-61- Supplementary studies on the project since 1980 are:-

(1) A 1980-81 comparative study of pending hydro-electric projects in Sierra Leone and Liberia by Helmet Meitzner and Gerhard Rouve. This report criticized certain technical aspects of the report of the Bumbuna consultants.

(2) A study by Dr. Rashid Faruque. This report challenged the viability of the Bumbuna hydro project (1983).

(3) In 1984, supplementary feasibility studies were carried out on the downscaling of the Bumbuna project, as had been suggested by the consultants. OPEC provided US $1.2 million, supervised by the World Bank, for the services of engineering consultants.

The Sierra Leone Government insisted on choosing consultants for supervising the preliminary work and Tata Engineering, a firm from , was chosen. Unfortunately, as a result of the lack of money for construction Tata stayed in the country for 2 years at the cost of US$ 1.2 million and did very little. It is believed that the World Bank was not pleased that the contract went to Tata rather than ESB.

5.2.4 Government Involvement

The government has always contributed financially to the project, though on a limited scale. Sierra Leoneans have also worked as technical personnel at various stages in the project.

-62- During the feasibility studies, a local consulting firm, Tecsult, was involved in the very first study (UNDP, 1972}. In the study by Bumbuna Hydro Consultants, three local consulting firms were involved, EnGCON, Tecsult and Eddie Davies Davies consultants (Pietrangeli, 1976).

Prior to the construction phase in 1982, local consultant firms were involved in some aspects of design. ENGCON sent two engineers to Italy to work for Pietrangeli consultants and Tecsult and Eddie Davies sent one engineer each to Motor Columbus in Switzerland. Both have since left the project. This move can be criticized in that the engineers sent were young graduates who would use the exercise only training one rather than for contributing to the design of the project.

Before the construction period, several meetings were held in Baden, FRG, to finalize the project between the government, the World Bank and the Bumbuna Hydro Consultants. Sierra Leone was represented at these meetings by the Bumbuna Project Development Committee formed in 1981. This committee was made up of the development secretary, as chairman, financial secretary, permanent secretaries from the Ministry of Energy and Power and the Ministry of Labour, the professional head of the Ministry of Works, a representative from the Chamber of Commerence, the general manager of SLEC and a legal adviser. Tenders were decided upon on during these meetings. To raise capital, it was decided also in these meetings to hold two donor conferences, one in Europe, another locally, the former to be organized by the World Bank and the latter by the Sierra Leone government. The local one was held in June 1981 but

-63- with very little success; only intentions were expressed by donors that attended. There are no records of a similar meeting in Europe.

Since 1981, when the Bumbuna Hydro Development Committee was formed, a local civil engineer was appointed to supervise its activities and act as secretary; he is still in the project.

Another aspect of government involvement was that it has always taken the initiative to seek for funds from sources outside the ambit of the World Bank. Recently there has been limited success with commitments from the Development Fund for up to US$ 15 million and US$ 5 from the Abu Dahbi Fund for Development. Other donors who have expressed interest but not yet committed themselves are the Japanese government, the European Economic Community, the Arab Bank for the Development of Africa and ASDB.

5.3 GOMA HYDRO PROJECT

By the provisions of the supplementary protocol to the Agreement on Economic and Technical Cooperation signed by the government of the People's Republic of China and the government of Sierra Leone November 7-10, 1973, the Chinese transmission line survey team visited Sierra Leone in July 1984 and carried out investigations for hydro potential and development in the country. The Goma hydro project along the Dodo river was chosen as the most feasible. During 1976 to 1985, the project was designed and constructed using mostly Chinese technical staff. The project, which is capable of producing 4 MW, was expected to be fully operational by the end of 1986.

-64- It is reported that most of the cost was borne by the People's Republic of China. The exact amount spent by the Chinese is not known, but the Sierra Leone government spent up to SLL 11 million for local expenses.

A few comments about the Goma project should be included in this discussion:

(a) It is believed that the potential of Goma was not fully exploited, in that it can provide 15-20 MW and if this potential is exploited more towns can be supplied with electricity. However this will necessitate more investment in equipment.

(b) The training of local staff in the project was minimal due to lack of cooperation. The Chinese stated that it was not in their mandate. Most of the Chinese involved in the project could not speak English, hence communication with local staff was scant. This is contrary to what happens in China itself, where foreign experts work with several Chinese.

5.4 MANO RIVER UNION PROJECT

The Mano River Union (MRU) is an economic Union between Sierra Leone, Liberia and formed mainly to carry out joint development projects.

-65- SOFRELEC, a French engineering firm was contracted by MRU to study the possibility of utilizing the river that divides the three countries for the production of electricity. The firm's report shows that potential exists for tapping up to 180 MW at a cost of US $356 million to be shared between Sierra Leone and Liberia.

However, MRU will find it difficult to implement this project because of several reasons. Firstly, the difference in the power systems between Liberia and Sierra Leone will have to be reconciled, Liberia uses 110v at 60 c/s and Sierra Leone uses 220v at 50 c/s. Secondly, Sierra Leone will find it difficult to use significant portion of power because the areas near the project area is less develop and do not have activities to use up the power, areas that can use the power are far away. Thirdly, Sierra Leone, nor Liberia can raise the capital necessary for the project hence they would have to go to the international financial sources for help where other hydro projects are also competing. Lastly, both countries have other hydro projects within their countries that seem to have priority over the MRU project.

And at present, only two hydro projects have gone on stream, the one at Guma that was built in the mid 60's and the Goma Project which only started this year.

-66- CHAPTER 6

IMPACT OF DECISIONS IN THE ENERGY SECTOR ON THE SOB-SECTORS

All the decisions made in the energy sector as outlined in third chapter do have serious impact on other areas in the sector. It is therefore the intention in this chapter to look at the various impact it has had on research, the general energy situation and national energy and planning of the country.

6.1 RESEARCH AND DEVELOPMENT

Energy researchers in the country since the mid-1970's have focussed their attention mostly on the assessment of new and renewable energy sources in the country and the development of various technologies associated with these sources, as stated in (26). The emphasis has been on the development and utilization of the technologies mentioned above. Providing baseline data to ensure effective policy formulation in this sector has also been a major interest of the researchers. As stated in (26), there is a divergence in interest between the government and those of the researchers because as stated in the national development plans, government for the last decade or so has occupied their minds with the provision of electricity by either

-67- using diesel engines or hydro-sources. Provision of funds to import crude oil at relatively high cost dominates their economic activities. Though some of the baseline data managed to influence some aspect of the government in a limited way, on the main there are very little links between the research programmes and government plans and decisions as at present. This situation has resulted in the R&D institutions depending to a large extent on outside insititutions for financial support for their programmes, because the support from the government is very small.

Due to the current energy problem in the country mainly caused by the inability of the energy supply industries to provide for the demand, several emergency measures have to be taken in order to salvage the situation. Most of the efforts by the government has been to provide funds to either meet the increased crude oil price and not transfering the added cost to the consumers and also to rehabilitate the power supply industry. A situation that resulted in diverting development funds from useful areas to salvage the emergency situation of serious scarcities in the sectors. This made it difficult for the government to give meanful contribution to R&D activities.

However there are a few positive areas in the sector that can act as link between research and government programmes, the most striking is the use of agricultural waste in the production of electricity. The unreliability of supply has made certain industries to depend on systems that utilize agricultural waste as fuel or use standby sets. The major areas are:

-68- the use of wood waste in a steam plant that produces 1.5 MW in the largest furniture industry in the country. Though this plant was not designed locally but do act as demonstration for viewers. Similar plants are used in at least two palm kernel plants but the palm kernel shells are used instead of wood waste.

the use of the research results from the university to construct two biogas plants using animal waste. One by a poultry farmer and another at an itergrated agricultural village for the production of electricity.

firewood and charcoal stoves have increased in type and kind in the market. Some of these stoves were designed and made with the help of researchers at the university. These include institutional stoves.

few houses have installed solar water heaters that were constructed locally using results of work done at the university.

Another positive aspect is that government has now been forced to think inwards for assistance, this will involve utilizing more local researchers in. policy formulation and planning. This has become necessary because of the need for more extensive use of biomass in the energy sector. If this trend continues it will assist to build a strong link between the R&D institutions and the government.

-69- Also local support for research is on the increase from both government and private sources. The government is planning to increase its direct support for energy research in the university significantly this year. Private sources are also showing interest including the oil marketing companies to look at the development of alternative energy sources in the country.

Lately the scope and content of research and developement activities are becoming very professional and widening to include aspects such as energy pricing, conservation etc.

6.2 OVERALL ENERGY SITUATION

The overall energy situation in the country has been adversly affected by the various ad-hoc decisions that was taken by government and described in chapter 3. The transport and the power sectors were the hardest hit due to their dependence on petroleum products that was scarce. Some of the problems in these sub-sectors have been discussed in the second chapter.

In addition to these problems outlined previously was the impact of these decisions on the political economy of and use firewood and charcoal. The greatest impact was on the price of these energy sources. Normally in urban areas over 60% of the final cost of firewood and 50% of charcoal can be attributed to transportation. Now, due to shortage of fuel in the transport sector and users of the fuel pay well above the price they have been paying, mainly due to the added cost for the fuel because the operators add any added cost to the fuel. This has resulted in the prices of

-70- firewood and charcoal to rise over 300%. Another aspect affecting the price of firewood and charcoal is the inflow of new entrants that were previously using gas and kerosene but either due to scarcity or high prices switch over to these sources. Since most of them are coming from the middle income group they are always willing to pay higher prices of these fuels so further pushes the prices up. These two factors coupled with the general inflation in the country has made the price of these fuels very high, so using them is getting to expensive compared to the other cooking fuels.

Apart from the changes in pricing, the energy situation has assisted to create awareness by the general public for undertaken energy conservation measures. Evidence of this new behavior can be seen in many areas including:

There are now signs on the walls of certain off ices informing workers to save energy.

People generally now use less fuel than before. This is achieved by reducing the amount of cooking or making use of alternative fuels.

Several methods are now employed by commuters in urban area to reduce their daily trips and so save on transport fuel on the whole.

6.3 NATIONAL ENERGY PLANNING

The greatest impact these energy decisions has had on national energy planning is the apparent acceptance by the authorities to depend on crisis management as their planning tool. It will appear that the authorities are akin to

-71- practise these measures because the problems had been around a long time and very little has been done to improve the situation. Also the persistence of these problems have shattered the planning machinery in the energy sector, especially the petroleum sub-sectors. The situation for the government is solving one crisis after another. Therefore for the past five years no serious energy planning seem to have taken place.

However, it is gratifying to note that the government is planning a national seminar in 1987 for the development of a national energy policy. It is believed that this move was initiated from overseas and it will be funded by UNDP.

-72- CHAPTER 7

MAJOR FINDINGS AND CONCLUSIONS

The analysis of this study reveals certain findings that require special comments, therefore this chapter aims at presenting the major findings of the study and then areas for possible actions are suggested before concluding the study which also comment on the prospects of the sector in the overall development.

7.1 MAJOR FINDINGS

Since the findings of the study are very different for two sub-sectors studied, they are discussed separately.

7.1.1 The Petroleum Sub-Sector

The results of the analysis in the petroleum sub-sector reveal some striking aspects in this sub-sector that needs to be highlighted. These aspects include exploration, procurement, distribution and petroleum pricing. The major finding in these areas are discussed below.

-73- The analysis show that the government entered into agreement with exploration companies that were carrying similar activities in most countries in the region without adequate provision of monitoring their activities and so end up having very little access to the results of the exploration activities of these companies. The fact these companies had significant experience in dealing on the same area with other countries in the region gave them an upper hand to negotiate and secure better terms. The poor economic of the country assisted in weakening the bargaining position of the country in negotiating with the oil exploration companies.

The move by the government to take direct role in the procurement of crude oil seem to have created serious problems for the country. Problems that mainly arise out of their inability to provide the foreign exchange needed to pay for the oil needed. The high prices and its unpredictable nature only worsens the situation.

Lack of proper planning and preparation made the government paying over 5 dollars above the Nigerian official price for oil from that country, and even higher if compared to spot prices. Though this case characterises all the transactions with Cevil company, the government supplier of crude oil from 1982 onwards, but the last two years with the old arrangements between 1980-82, the situation was not different. An added disadvantage the country suffered for in dealing with this company is its contribution to the growth of the parrallel market, because it is believed that during the scarcity of foreign exchange, this company was paid above the official rate in return for provision of foreign currency needed.

-74- Government's policy of protecting the consumers from the substanial price rises in cost of crude oil and that of cross subsidization among the petroleum products had some strong reasons which needs close scrutiny. These policies which is common to other countries in the region aim at keeping the price of fuel in line with incomes. Also to pass most of the increases to petrol and keep kerosene as low as possible due to its wide use by the poor. As the study shows, the advice of international funding agencies to have the prices at some economic value have only complicate the problems in this area.

Another feature in the pricing has been the government's determination to keep the price of petroleum products down. The duty on these products were kept the same for over three years while the marketing margin was increased regularly. An example has been with petrol, since 1982 the duty has been kept constant but market margin did rise by 38% and later by over 600%. There are also evidence that the government yielded to pressure from the oil companies by offering them the same substanial high increases for petrol, kerosene and diesel a situation which did not occur before. However it is unfortunate that the oil companies did not show the same attitude to the dealers who receive the same amount for over five years. Government should monitor such activities and use data obtained when negotiating with oil companies for price increases. This is important because it is possible that in the bid by the dealers to have more from their operations, they were more willing to hike the price of the products when it is scarce a situation that cannot be described at uncommon.

-75- 7.1.2 The Power Sub-Sector

Within the power sub-sector, the findings were for the sub-sector as a whole and the hydro development. They will be discussed that way.

The future of NPA as a para-statal or as a company is in serious doubt, as the results show they need to provide reliable and affordable power to the public. The unreliability that characterise their operations in recent times have done very little to their confidence on the society. Their problems has been both financial and technical.

The financial problems sterned from the statement shown in table 5.2, between 1979 and 1982 the operating cost have risen by over 142%, but sales have only risen by 32% despite significant increases in tarifs. The rationale behind most of the advice reports by international funding agencies to increase tarifs inorder to increase overall income have done very little to solve problems. Due to the inability to pay by the consumers, the increased tarif has only encourage pilfering and some willing to be cut off. A situation of suppressed demand has been created, hence the tarif structure needs a closer study.

The technical problems of unreliability and high losses in the system has been around for long time. The dependence on oil fired systems in the climate of high fuel cost puts the authority into deeper problems. Correcting measures to reduce the losses and possible diversification in the supply network could improve the situation.

-76- In the development of the Bumbuna scheme, the country is and will continue to pay very high price for delay. A delay that arise out of indecision in the side of the government and countless number of studies by world bank. The usefulness of most of these studies are yet to be evident. During the mid seventies, when enough work has been done to start the project and international financing then favoured such large hydro projects only studies that keep repeating the same data were produced.

Government's attitude to small hydro projects due to the obsession for Bumbuna contributed to the lack of development in that direction, because securing financing for such projects in the seventies was much easier.

7.2 SUGGESTED AREAS FOR ACTION

The findings that are discussed above suggest that actions are needed to be taken in areas of research and policies, hence in this section suggestions are made based on the results of the study.

7.2.1 Areas for Further Research

Certain research studies are neccessary using local personnel in the following areas, these are:

critical assessment of all exploration activities so far undertaken and verification procedures developed and implemented on the results of the reports of the companies.

-77- detailed analysis of all procurement agreements and produce a plan that the government can use for future activities.

an evaluative study of existing pricing structure of petroleum products should be carried out and proposals made for an equitable pricing policy of these products.

a study on NPA operations to identify a suitable tarif structure, a better institutional framework for the power sector and technical operations. It may be argued that several studies have been done on the power sector, but aspects that are proposed have not yet received their due attention.

7.2.2 Areas for Policy Actions

Inorder for a more stable and reliable supply, there is the need for certain policy initiatives in the energy sector that can be suggested based on the findings of this study. These are:

a high powered committee should be set up to advise the government on crude oil exploration, procurement distribution and pricing. This committee should be very active in negotiating with oil companies.

an infrastructural framework for power that clearly outline the role and obligations of the government, the suppliers and the consumers should be set up soonest.

-78- an hydro development plan should be worked out based on an established electricity demand evaluation. Suggestions for this plan from this study are a) the reduced phase 1 Bumbuna scheme, b) Gandorhun project and c) Benkongor project, these seems the most attractive that can attract funding from both local and international sources.

7.3 PROSPECTS IN THE ENERGY SECTOR

Despite there are several problems in the energy sector as already outlined, there are some apparent signs that can give some hope for the future in the selected areas discussed though these hopes will depend on the economic situation of the country. The dependence on foreign sources in this sector is almost total, hence the trends of the global economy will also effect events in this sector.

In the oil sector, people are now very hopeful that the present government is planning to change the crude oil procurement arrangements. They intend to either order the crude directly or ask another agent other than Cevil Trading Company. The National Petroleum Company seems to be expanding but the role of the goernment is still in a balance because it will appear that the government will be privatising many of the public enterprises. Probably in the future it will be a private company.

Pricing of petroleum products is a much more difficult problem. At present the cost of lighter distillates in Sierra Leona are said to be the lowest in the region based on the dollar value, but there is a threat of pending

-79- devaluation of the currency. If the currency is devalued by 300% as being suggested by IMF then the price of petroleum products will rise drastically due to the effect that it will have on the price of crude oil imports. Considering that wages will not go up by even half of that amount, such increases can only cause undue hardship on the general populace. It is therefore necessary that urgent studies are carried out to establish certain modalities for energy pricing in the country. These studies should include woodfuel as well as petroleum products.

There seem to be very poor prospects for the country to go into crude oil production because of the following reasons. Firstly, it is yet to establish that there are exploitable deposits in the country, secondly it is not clear whether the companies interested are in it for Sierra Leone, they might be more interested in the neighbourting countries that have shown more prospects.

In the Hydro sub-sector, the country will find it difficult to get the necessary funds needed for developing the Bumbuna hydro scheme. It was costing 312 million dollars for only 71 MW in 1983 and will have increased substantially now. The global economic climate will not support such a loan for Sierra Leone because the economy of the country at present cannot support it when we consider the debt repayment if the tarifs will have to be increased substantially beyond the capability of the consumers. This will be unacceptable to NPA.

-80- The only option for the country to satisfy its determination of supplying adequate and reliable electricity is to firstly rehabilitate existing diesel plants especially in Freetown. There might be the need to acquire added plants to replace the old ones. Ensure that fuel is always available in the provincial stations, because it is very expensive to operate these plants in the present condition when they are not working most of the time. The detailed study should be carried out on developing several mini-hydro sets in the country between 10 - 20 MW stations. Finding funds for such projects will not prove difficult. In fact UNDP has already sponsored a Canadian firm is prepared to build a demonstration unit of between 20 - 40 MW at the cost of $60 million. Unfortunately the response so far from the Government then was that they were more interested in Bumbuna project. From the data available to this study, it is clear that mini-hydro units should be promoted and be connected by a central grid system.

Existing signs show that research directions wil~ continue to concentrate on the alternative energy sources, especially on more efficient ways of using biomass in both domestic and industrial sectors. Insititutional and household improved stoves will be widely used in the country espically those using charcoal. This is because the market for woodfuel is expanding but this can only continue if there are serious programs on afforestation. However the development of stoves and the woodfuel trade will get more professional due to the type of participators it is now attracting.

On the whole, if the actions suggested are considered a better situation is expected in the energy sector of the country.

-81- REFERENCES

Atlanta Consultants (1979) "Forest Resources Development in Sierra Leone". UNECA Addis Ababa, Ethopia

Davidson, D.R. (1985) "Energy Use Patterns Sierra Leone". IDRC Ottawa, Canada. Manuscript Report 103E, 111P

Davidson, D.R. (1986) "Energy Research in Sierra Leone". IDRC Ottawa, Canada. Manuscript Report 133C, 39P

Davidson, D.R. (1986) "Shortages in the Energy Sector of Sierra Leone: Social Impact and Responses". Procs of CODESRIA Conf. on Social Impact and Responses to the economic crisis in Africa. CODESRIA, Dakas, Senegal.

Davidson, D.R. & Davidson c.c. (1987) "Charcoal Manufacture and distribution in Sierra Leone" Sent to African Journal of Science and Technology. ANSTI, Nairobi, Kenya.

-82- Davidson, D.R. & Kamara, D.B.L. (1981) "Assessment of Energy Potential in Sierra Leone." Procs. of ECONAS Energy Symposium. Pp No. ECW/TTE/11/6 Ecowas, Lapos, Nigeria.

Electricity Supply Board (1979) "Development of the Power Sector of Sierra Leone" London, England.

Enycon, Tecsult, Edward Davies Motor Columbus & Pietraugeli (1981) "Bumbuna Falls Hydro Development Project" Rome Italy

Faruque, R. (1983) "Macro-Economic Impact of the Bambuna Hydro Project" World Bank, Washington D.C. U.S.A.

Economist Intelligence (1981) "Quarterly Energy Reviews: Africa" London, England

Economist Intelligence (1985) "Quarterly Energy Reviews: Africa" London, England

Kabuysi, A.A. & Naylor T. (1985) "Cooperation and Development in the Energy Sector". Croom Helm, London, England

-83- Massaquoi, J.G.M. (1985) "Biomas Resources Assessment: A Survey of Sierra Leone's Energy Potential from Agricultural and Forestry Wastes". CSC (SS) ENP-4, Commonwealth Science Council, London, U.K.

Pietrangeli, G. (1976) "Bumbina Falls Hydro Electric Project." Rome, Italy

Pietrangeli, G. (1974) "Bumbina Falls Hydro Electric Project." Rome, Italy.

Sherriff, A.Y. (1986) "Prediction of Solar Radiation in Sierra Leone." B-ENG report. Mech. Eng. University of Sierra Leone. Freetown, Sierra Leone.

Sierra Leone, Government of (1929) "Review of the Oil Situtation and prospects in Sierra Leone. Ministry of Development and Economic Planning, Freetown, Sierra Leone

Sierra Leone, Government of (1974) National Development Plan, 1974-79, Ministry of Development and Economic Planning, Freetown, Sierra Leone

-84- Sierra Leone, Government of (1980) "National Development Plan, 1981-86" Ministry of Development and Economic Planning, Freetown, Sierra Leone

Sierra Leone, Government of (1984) "National Development Plan (Revised) 1983-86, Ministry of Development and Economic Planning, Freetown, Sierra Leone

United Nations Development Programme (1972) "Power Development in Sierra Leone" UNDP New York USA

United Nations Development Programme (1980) "The availability and possible uses of Lignite Deposits in Sierra Leone" UNDP New York, USA, SC/78-005.

Mei tzner, H. & Roure, G. ( 1980) "Comparative study of Pending Hydro Electric Project in Sierra Leone and Siberia" Mans RIVE Union, Freetown, Sierra Leone.

Sierra Leone, Government of "Presidential Speeches" Various issues, 1972 to 1985, Government Printing Off ice, Freetown, Sierra Leone.

-85- Sierra Leone, Government of "Budget Speeches" Various issues, 1972 to 1985, Ministry of Finance, Freetown, Sierra Leone.

Sierra Leone, Government of (1970) "Laws of Sierra Leone" Printing off ice, Freetown, Sierra Leone.

World Bank (1985) "Review of Public Enterprises in Sierra Leone" World Bank, Washington D.C., USA No. 5252-SL.

World Bank "World Development Report" Various issues 1980 to 1985. Washington D.C., USA

Sierra Leone, Government of "Statistical Abstracts" Various issues 1980-85. Central Statistics off ice, Freetown, Sierra Leone.

Sierra Leone, Government of "Private Communications, Ministry of Trade and Industry, Freetown, Sierra Leone.

Sierra Leone, Government of "Annual Reports of Sierra Leone Petroleum Refinery Corporation (SLPRC)". Freetown, Sierra Leone, Various Issues

-86- OPEC (1985) Organization of Petroleum Exporting Countries Bulletin"

Sierra Leone, Government of "Annual Report of National Power Authority (NPA) Freetown, Sierra Leone

-87- TABLE 2.1 CERTAIN GENERAL PARAMETERS OF THE ECONOMY

------Parameter Unit 1980 1981 1982 1983 1984 1985 ------

Popul. mls 3.04 3.23 3.30 3.30 3.46 3.76

GNP le mls 1009.8 1150.7 1340.00 1340.00 n.a 2990.8

GDP le mls 1054.3 1173.6 1391.8 1676.4 1993 2582

Exchange le/$ 1.034 1.174 1.25 1.27 2.51 5.8 Rate Debt $mls 345.1 348.3 369.1 359.4 382.0 400.0

Debt $mls 40.9 43.2 10.6 9.7 n.a n.a Service

Reserves SDRsmls 11.3 38.4 7.6 6.0 20.1 n.a

Source: !HF, Vorld Bank, C.S.O

-88- TABLE 2.2 CRUDE OIL IMPORTS AND ITS RELATION TO TRADE STATISTICS

Year 011 Cost of Tot. Imports Tot. Exports oil impt oil impt imports Oil (le ml) (le ml) as % of as % of (long tons) (le ml) tot impt tot expt ------1973 250725 6.185 105.45 98.56 5.9 6.3

1974 234976 19.30 167.34 103.6 11.5 18.6

1975 201050 18.24 167.39 123.92 10.8 14.7

1976 187896 22.6 166.69 129.22 13.6 21. 7

1977 185165 25.2 206.23 135.72 12.24 18.6

1978 217509 28.6 209.84 168.16 9.8 17

1979 230895 43.32 333.90 204.6 13.0 21.2

1980 218289 67.35 470.0 225.3 14.3 29.9

1981 220488 91.43 360.4 176.3 25.4 51.9

1982 157354 61.27 368.5 133.3 16.6 46.0

1983 178352 88.09 286.9 178.4 30.7 49.4

1984 231980 153.07 418.3 334.4 36.6 45.8

Hin. of Trade & Industry, CSO

-89- TABLE 2.3 PRODUCTS FROM THE REFINERY IN SIERRA LEONE(l971-84) (long tons)

------Year Petrol Kerosene Diesel Fuel oil LPG ------1971 35249 16056 68556 25309

1972 35871 17836 65078 25218

1973 40661 18282 65455 28712

1974 42685 19425 61896 26170

1975 41992 19870 62903 23815

1976 39031 23716 51266 21758 216

1977 37475 25215 54129 17039 817

1978 44312 24653 62728 22785 880

1979 47026 28633 68096 26928 663

1980 41744 27148 58059 26224 669

1981 40541 27445 63125 34615 750

1982 26898 19202 36071 29168 661

1983 34699 24987 43536 25203 759

1984 37743 28657 52261 23143 876 ------SLPRC

-90- TABLE 2.4 ENERGY CONSUMPTION IN SIERRA LEONE BY SECTORS, 1982 (TJ)

Energy Domestic Commer- Industrial Agricul- Transp- Services Elect­ Sources cial ture ortation ricity prod.

Petrol 1988.0

Diesel 7.0 1263.35 8.04 1992.0 7.9 1.96

Kerosene 1263 37.97 592.0

Fuel oil 106.79 1499.0 1134 .8

LPG 377 .5 0.14

Lignite 0.55

Sub-Total 1640.5 7.0 1678.75 8.04 5971.0 7.9 1136. 76

% as Com. 16.6 0.07 17.03 0.08 54.6 0.08 11.5

Firewood 31588.0 84.51 76.9 4.43

Charcoal 4441.0 13.03 103.5

Agric. 12. 1 88.6 Vaste ------TOTAL 37681.0 104.5 1947.75 8.04 5971.0 12.17 1136.76

% 81.4 0.2 4.2 0.02 11. 6 0.03 2.5 ------Ref (9)

-91- TABLE 4.1 PROFIT AND LOSS ACCOUNT OF THE REFINERY (le million)

1979 1980 1981 1982 1983

Crude oil purchase 237000 214000 230000 155000 188000 (long tons) Product sales 50.083 72.619 103.970 72.807 112.091

Other sales 0.022 0.206 0.237 0.592 0.504

Cost of sales 44.263 68.926 94.094 62.804 103.504

Gross Margin 5.842 3.899 10. 113 10.595 9.092

Operating Costs 3.021 3.810 4.365 4.37 6.356

Operating Surplus 2.821 0.089 5.748 6.221 2.735

Depreciation 0.459 0.486 0.485 0.495 0.136

Provision-Debt 0.223 0.214

Prior year adjustment 0.894 1.018 0.208

Interest on late 3.297 4.499 11.002 payment Exchange Rate adjust. 2.316

Provision for Platform. 9.537

Income from call a/c (0.556)

Profit before Taxes 2.361 (0.397) 1.405 0.058 (20.462)

Company Tax 1.335 1.584 1.600 1.535 2.435

Profit After Tax 1.026 (1.981) (0.195) (1.593) (22.897)

SLPRC Company Accounts

-92- TABLE 4.2 PRICE OF CRUDE OIL TO THE GOVERNMENT COMPARED TO VORLD PRICE ------Year Quantity Cost to Govt. NNPC Spot Differentials (long tons) ------price price to to (000$) $/bbl $/bbl $/bbl NNPC SPOT $/bbl $/bbl ------1980 218289 64170 39.15 36.3 37.67 2.85 1.48

1981 220488 76136 45.93 39.2 36.66 6.73 9.49

1982 157354 49496 41.44 35.6 33.5 5.84 7.94

1983 178352 48882 35.94 30.73 29.8 5.21 6.18

1984 231980 60894 34.42 29.69 28.85 4.73 5.57

1985 155511 40274 33.96 28.59 27.8 5.37 6.16

Min. of trade and Industry, CSO, Vorld bank, OPEC bulletin,this analysis

-93- TABLE 4.3 PRICE STRUCTURE OF PBTROLUBH PRODUCTS (1971-86) (le/imperial gallon)

------~------Product Compts of Year Price ------1971 1979 1982 1983 1984 1985 1986a)

Petrol Ex-Refinery 0.106 1.066 2.39 3.79 5.15 6. 65 11. 41 Duty Q.31 0.31 0.61 0.74 0.74 0.74 0.74 V.A Markt. 0.234 0.354 0.30 0.37 0.51 0.51 2.75 Dealer Comm. n.a 0.10 o. 10 0.10 0.10 0.10 n.a

Pump Price o. 65 1.83 3.40 5.00 6.50 8.00 15.00

Kerosene Ex-Ref ine.ry 0.105 0.724 1.33 1.86 2.22 3.22 8.88 Duty 0.14 0.09 0.27 0.27 0.27 0.27 0.27 V.A Markt. 0.175 0.163 0.24 0.27 0.41 0.41 2.75 Dealer Comm. n.a 0.10 0.10 0.10 0.10 0.10 0.10 ------Pump Price 0.42 1.07 1. 94 2.50 3.00 4.00 12.00 ------Diesel Ex-Refinery 0.091 0.538 1.88 3.05 4.00 5.90 9.52 Duty 0.24 0.32 0.48 0.61 0.63 0.63 0.63 V.A Markt. 0.139 0.132 0.20 0.24 0.37 0.37 2.75 Dealer Comm. n.a 0.10 0.10 0.10 0.10 0.10 0.10 ------Pump Price 0.47 1.09 2.66 4.00 5.10 7.00 13.00 a) up to half of year Central Planning unit, Hin. of trade & Industry, SLPRC, this analysis

-94- TABLE 5.1 DATA OF POVER SECTOR IN SIERRA LEONE (1971-85)

Parameter NPA Private Generation

Vestern Provi- Total Hines Others Total Area nces ------Installed capacity 1971 n.a n.a n.a n.a n.a n.a (HV) 1981 46.2 12.0 58.2 38.2 1.6 39.8 1985 58.2 16.0 74.2 38.2 25.0 63.2

Generation (GVB) 1971 76.0 17.0 93.0 70.0 n.a n.a 1981 133.0 30.0 163.0 72.0 n.a n.a 1985 93.3 18.6 111.9 64.0 n.a n.a

Sales (GVB) 1971 60.0 12.6 72.6 1981 97.0 19.5 116.5 1985 71.4 12.0 83.4

Losses (%) 1971 21 26 22 10 1981 27 35 28 10 1985 24 35 25 10 ------SLEC & NPA records, this anaylsis

-95- TABLE 5.2 SUMMARY OF FINANCIAL STATEMENTS OF NPA (1979-82) (million leones)

1979 1980 1981 1982

Fixed Assets 21. 237 19.975 39.52 37.497 Current Assets 7.248 7.58 7 .377 11.843 Currt. Liabilt. 3.335 5.282 4.313 8.2 ------Net Currt. Ass ts 25.267 23.608 45.827 44.991 Financed by Capital 2.0 2.0 2.0 2.0 Reserves 6.477 4.442 26.301 25.659 Loans 17.17 17.166 17.125 17.332 ------Net worth 8.457 6.442 28.301 27.659 Elec. sales 11.052 11.508 12.74 14.544 Opert. Costs 10.454 12.441 18.235 25.321 ------Surplus/Deficit 0.599 (0.934) (5.495) (10.767)

Subsidies by Govt. 0.52 0.083 6.937 11.47 Loans guarant. by Govt 16 .118 16.345 16.236 17.231 Govt. Debts to NPA 3.037 1.808 1.649 4. 713

NPA accounts

-96- TABLE 5.3 HYDRO-ELECTRIC SOURCES IN SIERRA LEONE ------Scheme Location Installed Capital Cost per & Type Capacity Cost,ex trans KV install. (HV) (US$ ml) $/KV ------Bumbuna Hagburaka 305 560.74 1840 storage phase 1 (53.4) (159. 05) 2980 phase 2 (80) ( 134. 60) 4895 phase 3A (125) (94.79) 2106 phase 3B (185) (80.59) 1343 phase 4 (305) (91.71) 756

Red.phase 1 (47) (98.7) 2095

Gbangbaia Hoyamba 1.0 3.4 3410 Run of river Gandorhun Bo 20.0 65.4 3270 Run of river Mawaloko Kabala 0.5 3.2 6420 Run of river Benkongor Kono 10.8 22.0 2040

Betmai Hagburaka 3.6 13.5 3750 Run of river Singimi Hoyamba 7.2 28.0 3890 Storage Kambatimbo Komadugu 0.8 6.6 8250 Diversion

CESl/CANREDE Ltd., SNC, Bumbuna Studies

-97- TABLE 5.4 SOURCES OF FINANCING OF BUMBUNA PROJECT (1970-84) (million USS)

1. Italian Government 31.85 (79%) 1.1 Pre-feasibility studies 1.375 1.2 Cost for Consulting Engs. 4.125 1.3 Review of report 0.33 1.4 Access road(48km) & 5 bridges 6.5 1.5 Geological studies 1.4 1.6 Construction of houses(l8) 1.53 1. 7 River diversion,tunnel&tailrace 15.0

2. Vorld Bank 7.344 (18%) 2. 1 Feasibility studies 0.06 2.2 Tech. asst. to studies 2.029 2.3 Completion of studies & prepare tender documents 2.325 2.4 Reports on NPA management 0.169 2.5 Updating report & analysis 0.82 2.6 Completion of tender documents 1.471

3. OPEC Special Fund 1.2 (3%) 3 .1 Tech. Asst. for Management 1.2 & Tech. Training

TOTAL 40.91 (100%)

Local support 2.432

-98- LIST OF OFFICES CONTACTED FOR THE VOR.K

Ministry of Finance

Ministry of Development and Economic planning

Ministry of Energy and Power

National Power Authority

Ministry of works

Ministry of Hines

Sierra Leone Petroluem Refinery Corporation

Bumbuna Hydro Authority

-99-