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Jubilee FPSO Due Diligence Goes Into Borrowed Time

  • SOURCE: | qwesa2big

    By J. Ato Kobbie, Managing Editor

    The International Finance Corporation (IFC) together with the Multi-Lateral Investment Guarantee Agency (MIGA), have requested for an extension of time to continue with their internal motions concerning the due diligence on the Jubilee FPSO.

    The request by the two World Bank affiliates pushes into borrowed time the Jubilee Partners’ expectation of the coming onboard of a consortium of investors and lenders, who are seeking to take equity in the company that owns the Jubilee FPSO Kwame Nkrumah MV 21.

    MODEC’s subsidiary company, Jubilee Ghana MV. 21, presently owns the Jubilee FPSO and it is into this subsidiary company that the prospective investors and lenders, including the IFC are seeking to take equity.

    Jubilee Partners, Tullow Oil, Anadarko, and Kosmos Energy have all advanced loans to MODEC towards the construction of the FPSO and expected to be repaid from the financing that should have come from the equity participation of the prospective lenders.

    Sources close to the investigations told The Business Analyst that the two World Bank members have asked for more time to go through their internal processes concerning the due diligence, to which MODEC had agreed. The IFC-MIGA request followed an earlier release by MODEC, which announced that a five-month due diligence carried out, at the instance of the IFC, had found no acts of corruption or violation of the US Foreign Corrupt Practices Act (FCPA).

    MIGA, has already announced an extension of the suspension of its political risk insurance for the prospective investments of the consortium.

    The delay in the prospective investors coming onboard means the Jubilee Partners involved are starved of the funds that they need to develop other fields and meeting their obligations under their various petroleum agreements.

    Kosmos Energy, in its January 13th filing with the US Securities and Exchange Commission (SEC), cited both the withdrawal of the MIGA political risk insurance and the indebtedness owed the Jubilee partners as risk factors that could affect production from the Jubilee Field. The IFC, along the line raised an alarm over a service contract that MODEC awarded to Strategic Oil and Gas Resources Limited (StratOil) in the run-up to winning the contract to construct the Jubilee FPSO, and asked for a due diligence to be conducted.

    By a release dated January 20th 2011, MODEC stated that the due diligence that was conducted into the StratOil service contract found no wrongdoing. A former Chief Executive Officer (CEO) of the Ghana National petroleum Corporation (GNPC), Mr. Tsatsu Tsikata is the CEO of StratOil.

    The company issued a press statement last year, confirming that it had a $5million service contract with MODEC, under which it helped the company put up the successful bid, with which it won the contract to construct FPSO Kwame Nkrumah. StratOil stressed on the fact that the bid put up by MODEC, not only met the highest technical standards required, but had the most competitive price, and delivered the FPSO in a record time.

    When The Business Analyst contacted the IFC on January 27, to find out the position of IFC on the findings of the due diligence conducted, Desmond Dodd, Head of Communications in charge of IFC Sub-Saharan Africa responded:

    “We remain in the due diligence phase of our potential financing for the MODEC.” He was however, dodgy on specific questions posed by to him by this paper which included: “1. Whether the due diligence report on the MODEC-Strategic Oil and Gas Resources (StratOil) service contract had been presented to IFC and if so when? (and)

    “2. What does the IFC make of the findings, which according to MODEC’s press statement was that ‘no laws were violated in the award of the contract?” In an earlier interaction last year, Dodd, who was parroting the IFC’s credentials in ensuring the Jubilee project has “the proper social and environmental safeguards and management plans and that it promotes governance and revenue transparency in Ghana’s growing oil and gas sector,” refused to respond to whether the IFC conducted due diligence before providing $100 million and $115million to Kosmos Energy and Tullow Oil respectively.

    Subsequently MIGA announced on February 2, 2011 that “it has agreed to extend for a brief period the suspension of its Contract of Guarantee for Equity Investments entered into with MV21, a subsidiary of MODEC, Inc., in relation to the Jubilee FPSO.”

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