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Suspension of political risk insurance for FPSO extended

  • SOURCE: | qwesa2big
  • The vessel being used to produce crude oil from the Jubilee Field, the FPSO Kwame Nkrumah will remain for a while without any political risk insurance cover.

    It follows a decision by the Multilateral Investment Guarantee Agency, MIGA to extend its suspension of the cover.

    The cover provides guarantees to foreign companies that their investments in the facility will not be touched in the event of a change in government and is different from the general insurance provided by a consortium of local insurance companies.

    The World Bank wing first suspended the cover sometime last year to allow for investigations into a 5 million dollar services contract signed between MODEC, the company that supplied the FPSO to Ghana and Strategic Oil and Gas Resources.

    It is uncertain why MIGA has extended the cover but, a brief statement published on its website reads MIGA 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.

    Already, MODEC is being investigated by US authorities on possible violations of the US Foreign Corrupt Practices Act after MODEC awarded a 5 million dollar services contract to Strategic Oil and Gas Resources Limited, a company partly owned by former GNPC Boss, Tsatsu Tsikata.

    Some watchers believe the extension could be timed to await a conclusion of US authorities’ investigations. Already, Kosmos Energy believes the investigations could have implications for the country’s ability to continue production of crude oil to the extent that MODEC, which built and operates the FPSO will have a difficulty with its financiers.

    The Jubilee partner, in its application to list publicly in the US said if MODEC cannot access funding, partners in the field "may be required to contribute more funds before September 15 this year in order to purchase the FPSO outright or find an alternative funding source or buyer.

    KOSMOS in its prospectus had made it clear if the Jubilee partners lost access to the MODEC FPSO, they would be unable to produce hydrocarbons from the Jubilee Field unless and until they arranged access to an alternative FPSO.

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