REVEALED: IFC HAS NO STAKE IN FPSO
…But Now Explores Possibility of Financing Owners
…MIGA Suspension No Threat to First Oil
By J. Ato Kobbie, Managing Editor
The Business Analyst can report that the International Finance Corporation (IFC)
has not invested a cent in the floating production, storage and offloading
vessel (FPSO), Kwame Nkrumah, contrary to popular belief, but is rather now
exploring the possibility of investing in the company that owns the vessel,
which has been moored (anchored) at the Jubilee Field for the production of
first commercial oil later this year.
“A consortium of lenders and investors, including the IFC, is currently
carrying out due diligence to EXPLORE THE POSSIBILITY OF FINANCING a floating
production storage and off-loading vessel for the Jubilee Field,” the IFC stated
(emphasis ours).
What this means is that the IFC, together with the other lenders and investors,
have not provided any financing for the FPSO. All they are currently engaged in
is looking at the possibility of taking equity in Jubilee Ghana MV21 B.V., which
is the special purpose vehicle company incorporated in the Netherlands by MODEC
to own the vessel.
The FPSO financing was borne by MODEC and the Jubilee partners.
In order to free up financial resources, the partners have decided to convert
the financing into a lease option, which is purely a financial transaction and
has no impact on the responsibility of the partners to develop the field. If
IFC does not help the partners to refinance the FPSO, the partners will still
have to pay for the FPSO.
The IFC financing therefore cannot delay the jubilee development in any way.
The IFC stated its response following a letter from The Business Analyst to its
CEO, Lars H. Thunell, and the World Bank boss, Robert Zoellick, as well as other
executives, seeking to know among other things if it conducted due diligence on
the relationship between Kosmos Energy and the EO Group, before granting the
former a loan to the tune of $100million, especially since this financing was by
extension financing of the EO Group.
The question was occasioned by reports of the IFC’s intention to carry out due
diligence on the relationship between MODEC and Strategic Oil and Gas Resources
(StratOil), a company in which Tsatsu Tsikata, former Chief Executive Officer of
the Ghana National Petroleum Corporation (GNPC), has a stake.
The paper questioned the IFC on why it singled out the relationship between
MODEC and StratOil, “amidst leaking its business to pro-Kosmos media in Ghana,
obviously with intent to creating 'panic and alarm' about threats to first oil
time-table”.
The paper sought from the IFC if it was not embarking on this venture as part of
an arm-twisting, blackmailing antic at the behest of Kosmos’ lobbyists.
The paper raised the query with reference to an audio-visual promo by KRL
International, in which its Managing Director, K. Riva Levinson, asserts her
role as lobbying the IFC, US Congress, USAID, etc., to put pressure on the
government of Ghana to back down on its stance in its dispute with Kosmos.
Insurance
The Multilateral Investment Guarantee Agency (MIGA), also a member of the World
Bank Group, recently announced suspension of its political risk insurance meant
to give comfort to potential investors who are exploring the possibility of
investing in Jubilee Ghana MV21 B.V.
MIGA was established in 1988 during a period of military dictatorships and
political turbulence in many developing countries, to provide guarantee to
private investors for their foreign direct investments in developing countries.
The insurance for the FPSO Kwame Nkrumah against physical damage is, however,
covered by a consortium of the Ghana Insurers Association, and spearheaded by
the State Insurance Corporation (SIC) as the re-insurers and therefore remain
intact.
The Business Analyst can state authoritatively that many financiers have for a
long time been knocking on the doors of Government and the GNPC, seeking to
participate in Ghana’s oil production.
The IFC stressed in its response to the paper’s queries, on its contribution to
Ghana’s economic development.
“IFC has an excellent working relationship with government, business and civil
society counterparts in Ghana and is fully committed to helping the Ghanaian
people develop their economy,” stated Mr. Desmond Dodd, Head of Communications,
IFC, Sub-Saharan Africa.
He said the IFC lent over $300 million to private sector projects in Ghana last
year.
The IFC said it has helped by providing financing and advice for the development
of the Jubilee Field (obviously referring to the loans granted Kosmos Energy and
Tullow Oil).
The IFC said it was committed to good governance and conducts due diligence on
all of its projects on an ongoing basis and that “Due diligence does not imply
wrong-doing but is necessary to ensure projects follow the highest standards”.
According to the IFC, its engagement helps ensure that the project has the
proper social and environmental safeguards and management plans, and that it
promotes (good) governance and revenue transparency in Ghana’s growing oil and
gas sector.
“It is public knowledge that Kosmos is considering selling its stake in the
Jubilee Field,” said the IFC. “This is a matter for Kosmos and the Government of
Ghana to resolve, and any sale would have to follow Ghanaian law.”
In conclusion, the IFC said it hoped “this issue would not hold up the
development of the Jubilee oilfield so that Ghana’s benefits can flow at the
earliest possible time.”
The IFC is a member of the World Bank Group that finances private sector
investments.
MODEC, in a press release last week, announced that at the request of one of the
equity partners, it was taking due diligence of a service agreement it has with
Strategic Oil and Gas Resources Limited (StratOil), for which purpose it had
obtained the services of an independent counsel.
The release followed publications earlier that week by a section of the private
media that the IFC was investigating the circumstances surrounding an MODEC’s
agreement with StratOil, a company which is partly owned by Mr. Tsatsu Tsikata.
MODEC executed the contract to construct the FPSO with the Jubilee Partners in
July 2008 at a time when the former CEO of GNPC was in jail.
StratOil
A release by StratOil confirmed MODEC had engaged its services for over two
years now, and that the latter had asked for their consent to disclose an
agreement that was signed on June 4, 2008 between the two companies to the
shareholders participating with MODEC in the equity of the FPSOKwame Nkrumah, as
well as lenders to the project. StratOil has given its consent to the
disclosure.
The company said it provided advisory and consulting services to MODEC for the
preparation of their successful bid in a transparent tender process for the
supply of an FPSO to the consortium involved in developing the Jubilee oil field
and related services.
According to StratOil, its services to MODEC included “recommending their use of
financing from the International Finance Corporation(IFC) as well as the African
Development Bank, Afreximbank, the US Overseas Private Investment
Corporation(OPIC), the Africa Finance Corporation(AFC) and establishing contact
between MODEC and these institutions.”
The company said it also introduced MODEC to equity providers in the Middle
Eastand carried out extensive economic modeling work for the project.
StratOil acknowledged with pride its role in contributing to MODEC’s winning of
the tender, which it said “is beneficial to the Jubilee project and to Ghana
that the MODEC bid was a low-priced bid that met the highest technical standards
in the industry and that is enabling first oil from the Jubilee field to be
achieved in the 4th quarter of this year.”
The StratOil statement, which was issued on July 27, 2010 was signed by Stuart
Sutton-Jones, Corporate Affairs Executive of the
company.
