IFC has no stake in FPSO

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.