Kufuor Ambushed By British Press Over Ropy Oil Deals

As they accused him of sharing Ghana’s oil blocs to cronies, friends and signing crooked agreements

The British media, noted for its aggressive tactics have ambushed Ghana’s former President John Agyekum Kufuor and accused him of corrupting the oil sector by sharing Ghana’s oil blocks amongst his personal friends and party cronies, as well as blowing hard-earned EUROBOND cash on crooked agreements with Balkan Energy.

The Financial Times of London, told President Kufuor that his government smells of creeping cronyism as most of the oil blocks went to either party functionaries, personals friends or political cronies, a situation they said offended the US Foreign Corrupt Practices Act (FCPA).

The paper, in an exclusive interview with former President Kufuor, listed the only Ghanaian beneficiaries of Ghana’s oil as: Kodjo Alata-an 80-year old long time associate of the President and a kingpin of the party he led, New Patriotic Party (NPP); Berwuah Edusei - friend of President Kufuor, NPP North American Chairman, former Ambassador to Switzerland and later to the U.S. under Kufuor; George Owusu - Friend of Kufuor; and Nick Amarteifio - personal friend of Kufuor and a board member of the Central bank, Bank of Ghana under his tenure.

“The problem though for you now if you look at all these (oil) blocks they have people connected with you or your party, and it looks like you divided up the oil among political cronies. And now that oil has been found, these blocks could deliver hundreds of millions of dollars to people connected with your party. Is it not understandable that the government that came in started having a look at this stuff?” the paper put it to former President Kufuor.

On the Issue of the $750 million Eurobond Cash, the reporter wondered how come the President spent a whopping $500,000,000, paying oil bills. The Eurobond cash attracts an interest of 8.5%. The paper also raised serious questions about the controversial Balkan Energy agreement Kufuor signed for the maintenance of the ‘Osagyefo’ power barge.

The paper noted that “Balkan Energy claims to have invested $100m in fixing up the barge. People at the VRA say it doesn’t look like that much has been spent. According to the contract they now pay a $10m annual fee to lease the barge, and bill the government something like $40m in return as a capacity charge. “But this is the terms of the contract which was concluded in your time. Plus the company gets to set the fuel price on top. By most standards this seems like a pretty ropey deal for Ghana.”

Read Below transcripts of the Interview.

OIL DEALS

FT: Could we move onto the subject of Kosmos and EO?

JK: Thank you for that. Because that is where I feel so saddened. For once I am almost tempted to believe it, when people say that oil finds are a curse, that there might be something in it. I don’t want to believe it yet.

FT: Why are you so sad?

JK: Before I came to power, I made a statement and it was captured on the front page of the Graphic. In 1999, 2000. I said I believed my party would win and come to power and in our tenure we will strike oil. I criticized the then government for failing to get oil because of the unfriendly atmosphere for the private sector that prevailed. They didn’t know how to bring the right people in. I made this statement because I had been travelling here and in the US. In the US I went to Houston. The friends of the party gave a big reception for me. It was there that I met some Ghanaians. And I challenged them. I said look here. Everyone says Houston is the oil capital. You are here, you are not helping to get some serious explorers from Ghana. We are coming to power in no time, we must strike oil. So whatever opportunities you have, bring the people for us to strike. And I was so worked up because I couldn’t understand why Nigeria to the east and Cote d’Ivoire to the west all had struck oil. And Ghana sat in between always moaning about poverty. Immediately I came to power I, in a way, restructured the Ghana National Petroleum Corporation.

First I appointed a chairman who immediately set to work. But in ways I thought might not go to the target. So I shifted again and got a new team and it was this new team that made it its policy to promote the blocks. They went to Asia, Europe, America, everywhere. They talked to the Chinese, CNOOC, to come.

FT: At the time the oil price was fairly depressed, no?

JK: That might be it. But you don’t take an exploration block today and tomorrow strike. It takes years. We invited the Indian national oil company. They also came and then went away. Before Kosmos was introduced by two Ghanaians. At that time there was no oil. We had come to meet Dana, a British company, which had a block for 5 or 7 years previously, I believe, but which just couldn’t raise the resources. They just couldn’t raise the resources to drill. Their term lapsed but we extended it for a year. Ennex came later. It was made up of the geologists and geophysicists who worked for Dana and Philips and Vanco. They knew the field. They must have felt it was there to find. They were just technical. To explore you needed huge resources and those they couldn’t raise. Their time was extended but then they gave up. But the people from Kosmos came ... with financial resources. They were backed by Blackstone and Warburg Pincus. The attractive thing was that they were the first people to strike oil for Equatorial Guinea. And at that time I would have given my right arm for Ghana to strike oil. The Ghanaians brought these people with a new name.

FT: These Ghanaians were the chairman of the ruling NPP party in the USA, and a party figure in Houston?

JK: Well. Let me tell you. Before I came to power, I had gone there to Houston. That was I believe the first time I got talking to Owusu. People say Kufuor’s friend.

FT: But Edusei was your friend?

JK: Edusei was my chairman.

FT: But also your friend of long date.

JK: Well not only that. Don’t forget there was no oil. And Edusei I will tell you is a very proud professional running his own clinic in Washington and that sort of thing. He wasn’t a man of straw I picked to go and front. He was the chairman of my party in the whole of North America. When I went before I came to power he accompanied me everywhere. I went to Houston with him. And at this reception where I said I want us to strike oil, and I want them to help get us focused explorers they were present. So he and Owusu brought Kosmos. I believe that must have been 2003/4. Immediately I came to power 2001…the North American party sent a petition signed by over 100 people that I should make Edusei ambassador in Washington. I turned him down. That is the truth.

FT: But you offered him an ambassadorship in Malaysia?

JK: He turned it down. He said he would rather stay to do his practise. I was embarrassed. Later a year or two later Switzerland became vacant and to assuage the wounded pride and all that I invited him to be Ghana’s ambassador in Switzerland. He was dragging his feet. But I told him of the attractions, Geneva, good schools for children. I sensed that if he wanted to be a diplomat that was the place to prepare him for the job.

FT: But during that period when you appointed him he was already negotiating the Kosmos deal both with the government and the company.

JK: No. It was after I had rejected him. O(wusu) was the commodities manager of Shell. He wasn’t a small man. So the two of them came and that made their presentation. It was all the more convincing because Owusu knew what he was about. In fact I learnt that before I came to power he was one of the people who came with Vanco. That had been a line of business for Owusu. And now with Edusei they came naturally I had to pay attention to them.

FT: But the central allegation in the whole investigation, leaving aside the details, was that it was their connections, Edusei and Owusu, to you that enabled Kosmos to get a deal that is more favourable than others before (and after) them.

JK: Let me show you a table of what transpired before my tenure.

FT: I have looked at research by Wood Mackenzie. They estimate that the terms of the West Cape 3 points block compared to the terms of Deep water Tano will cost Ghana $3.8bn over the lifespan of the Jubilee field.

JK: This is what happened in my tenure. There are 13 companies with blocks ... Please, everything is here. Check the tables. The other thing you shouldn’t overlook, where Kosmos got the block there hadn’t been any 3D studies on the block. Unlike Tullow that took over from Dana where the 3D had been done. The GNPC made a point that whilst the royalty or whatever there was a point difference because Dana had done the basic work and Tullow was the beneficiary and for that could not be given the same duty or whatever as Kosmos, that was going to the extra cost of doing 3D.

FT: What has consolidated suspicion in Ghana about that deal is that subsequent little stakes in the oil blocks also went to friends of yours. For example Nick Amarteifio with the Aker block. Kofi Esson and Kodjo Alatta who were involved with the Tullow block.

JK: Why are they not being probed?

FT: They have been probed.

JK: Kodjo Alatta is an 80-year old politician starting from Kwame Nkrumah’s time through Busia. We are very personal friends. He brought Kofi Esson and Tullow. Kofi Esson I never knew before. Kodjo Alatta I knew. He could walk to my house. He brought Kofi Esson and said they had British partners. My overriding concern was to get oil for Ghana. And if people I knew would bring them, why not? Tullow got its block and eventually struck and I then saw Kodjo Alatta didn’t even have a stake. Suppose it was my practise to benefit unduly from people introducing these companies and I did it with E and O. I would do it with Kodjo Alatta and Kofi Esson.

FT: What about EO, there are suspicions that you have shares in EO?

JK: What I am trying to tell you: If Kufuor would ask for shares with EO, he would ask for shares with Kodjo Alatta. Kufuor would ask for shares with Vitol. He would ask for shares with everybody.

FT: The problem though for you now if you look at all these blocks they have people connected with you or your party, and it looks like you divvied up the oil among political cronies. And now that oil has been found, these blocks could deliver hundreds of millions of dollars to people connected with your party. Is it not understandable that the government that came in started having a look at this stuff?

JK: Let them look. Because I perhaps, I would also be looking. But I would not go disqualify or abrogate contracts that have been executed under the authority of parliament. I would never violate contracts.

FT: Even if they are not in the interest of the country?

JK: Otherwise you attack contracts and it would be illegal. Take them to court and prove their guilt. So why don’t they take them to court to establish that?

FT: How do you get round this problem of perception that there are all these little stakes that could deliver lots of money ... to people connected to you?

JK: Have they delivered lots of money? Let me tell you again talking about whispers and perceptions. Vittol was a trader with the previous regime and was reputed to be one of the biggest oil traders with strong connections to the previous regime. They got a block in my tenure. They are there and I believe they also have struck gas in shallow waters. They are not my friends.

FT: So you spread it around?

JK: What I am trying to say whoever came with a viable plan, because due diligence was always done. We looked out for technical competence and financial capability. If you had these two things, our overriding concern was to get oil for Ghana. I didn’t go out and penalize anyone because of associations or perceptions or whispers which is what is happening now. That is the difference.

FT: But somehow the perception has stuck of a period creeping cronyism.

JK: No matter what. Look. You have heard of the executive jet Sarkozy helped me to get. What are they saying? Right now they are quiet and they have the plane. What about the Jubilee house (presidency building)? Anything that Kufuor did they want to tarnish. But if they had been careful not to use propaganda too much they would know that those things were being done for Ghana, for posterity. Kufuor’s term was up. Kufuor was never going to use that plane. He was never going to live in the Jubilee house. But see the venom with which they attack whatever Kufuor did. And that oil was struck by Kosmos after over 100 years of search. So naturally they thought that if Kufuor and his chairman and friend had got these people it means his party. Is this fair? Can we build a country on this basis?

FT: In terms of perceptions, if you have got a big resource that has been discovered and it looks like people from only one group, ethnic or political, are profiting, it can be destabilising, no?

JK: Who are the Ghanaians involved in Vanco? Are they related to Kufuor?

FT: I believe the current managing director of GNPC was formerly involved with Vanco.

JK: Whose friend is he? I am telling you, did I remove them? Now he is in the saddle does it mean that all the money is going to Tsatsu Tsikata (former head of GNPC) and his friends?

FT: I have no idea. But this is what oil does, it divides people and gets them fighting.

JK: That is why (I) say now I am almost forced to believe that finding this thing might be a curse. As I have told you before I came to power I had told the world I would do everything to get oil for Ghana. Thank God I did and thank god Kosmos came with whatever recommendations and introductions of Owusu and Edusei. These are very serious people in their own right.

FT: But strictly given that he was a party official the fact that he was awarded a stake in the oil block and paid by Kosmos ...

JK: Whatever stake Edusei has was from Kosmos, not government.

FT: Can I just go back to that detail, because it is what triggered the investigation and triggered the due diligence done by Anadarko which was given to the Department of Justice in Washington. This raised a number of red flags. One of the reasons was that Dr Edusei was a party official who was named as an ambassador. The FCPA regulations in the US say that any payment or payment in kind to a party or government official (that could influence a contract allocation) constitutes a violation of the Foreign Corrupt Practises Act.

JK: Are you sure that there was something like a party official in this?

FT: You told me yourself he was the chairman of the NPP in the USA?

JK: No, but he was a party official not a government official.

FT: Yes but in the FCPA regulations in the USA it says “party official or government official.”

JK: The Department of Justice in Washington has investigated this matter at a cost of $12m over a year and has come out and said there is no substance to this. The DOJ is an American institution. If this body that holds authority to investigate corruption after a 2 year investigation says there is nothing to hold onto, who is anybody to still say now even the FCPA itself should be suspect. Aren’t we shifting the posts?

EUROBOND CASH & ROPEY BALKAN ENERGY AGREEMENT

FT: It is said you blew the proceeds of the $750m Eurobond you issued on absorbing the oil price rise.

JK: That is the biggest, biggest lie. I believe the current government itself wrote to the IMF and World Bank confirming how the Eurobond was disbursed for the energy sector, for roads.

FT: When I asked them they told me that a significant proportion of the proceeds went towards paying off debts at the Tema oil refinery.

JK: Please. Is that not to do with the crude oil we refined? It is energy. Look when you are managing anything flexibility can be a virtue. What not to do is get too fixed and rigid. But I tell you I know that around $500m of the Eurobond was disbursed for the energy sector with all its ramifications. It could be the Tema refinery, it could be electricity with the thermal plants we had to install. And then the roads sector, and this had been ongoing. You know Accra, all the arterial roads leading to Accra have been tackled very seriously.

FT: I have also looked at some of the energy projects from that time, for example the Balkan energy project ...

JK: Balkan Energy, are you talking about the barge? Do you know the history? They took a loan of $100m from Japan to build the barge in Italy in the 1990s where after it had been built it remained until we came to power 5 or 6 years later. We had to come and pay the demurrage and ship it to Ghana only to discover that even the pond it was supposed to stay in was plugged up. So we had to leave it at the naval base in Takoradi, for years while we went round doing the whole thing. By which time there was rust in the equipment, we had to deal with that. We do not accuse the people who did this whole thing, pretending irresponsibly that there was gas to fuel this thing when there was none. The propaganda is too much.

FT: They were expecting the West Africa Gas Pipeline to begin supplies.

JK: Who got the West Africa Gas Pipeline going? I did. I took a loan. It was part of my friendship with Obasanjo. The thing was on the drawing board from the 1990s but hadn’t seen the light of day. Why? Because Ghana couldn’t pay its share of the equity. And without Ghana paying the equity of something like $90m the partners just wouldn’t even start.

FT: To go back to the barge. My understanding is that Balkan Energy claims to have invested $100m in fixing up the barge. People at the VRA say it doesn’t look like that much has been spent. According to the contract they now pay a $10m annual fee to lease the barge, and bill the government something like $40m in return as a capacity charge.

JK: But is it because they are producing the energy? Definitely this didn’t happen in my time.

FT: But this is the terms of the contract which was concluded in your time. Plus the company gets to set the fuel price on top. By most standards this seems like a pretty ropey deal for Ghana.

JK: I tell you the barge had been done in such a way it locked up capital. The previous government had borrowed on the pretext of having the energy to fuel it and for many years the thing was left in Italy with the interest accruing against Ghana and then demurrage. It was my government that brought it back to Ghana. When we brought it we knew there was no gas to fuel it so we were forced to use diesel, we tried to take it to the pond but the place was silted up.