Alarm blows over FPSO Kwame Nkrumah Contract

Tsikata ‘grabs’ $5m deal

The International Finance Corporation (IFC) and the World Bank (WB) are investigating the role purportedly played by Strategic Oil and Gas Resources Ltd. (SOG), a company 50% owned by Mr. Tsatsu Tsikata, former Chief Executive of the Ghana National Petroleum Corporation (GNPC), in the award of the FPSO contract by Tullow to MODEC in July 2008.

Highly-placed sources at the IFC and the World Bank have intimated to the Business Intelligence Desk (BID) of The New Crusading Guide that upon MODEC's belated disclosure to the IFC/WB of the award of an advisory services contract worth $5m to Tsatsu Tsikata's SOG company, the two institutions, apparently not happy with the belated disclosure and curious to know what role SOG had played prior to winning the contact, have decided to conduct "due diligence on the contract focusing on the nature of the services provided and the basis of the award of the contract".

MODEC's belated disclosure which was done on July 13, 2010, two clear years after the award of the contract to SOG, also indicated that MODEC (MV21) had already paid US$2million to SOG and a further US$3million was slated to be paid to it at first oil production (possibly November this year). The IFC, World Bank and the other shareholders including the Jubilee Partners, according to our IFC/WB sources, were all awaiting sight of the contract as at July 13,2010, the day of the MODEC disclosure of its (contract's) existence.

"Additionally IFC would like to do due diligence on the Jubilee Partner's award of the FPSO contract to MODEC focusing on how involved GNPC were in the decision to award to MODEC; What were the grounds of the decision to award to MODEC; And also, IFC would like to understand how much influence Tsatsu Tsikata had on enabling MODEC obtain a competitive advantage", disclosed a top official of IFC who spoke to our BID on condition of strict confidentiality.

The IFC top official further revealed that the signing of MODEC's Financing Deal (Loan Agreement & Shareholders Agreement) for the FPSO Kwame Nkrumah, which was slated for July 15, 2010, had had to be postponed at the request of the IFC, in order to enable the latter (IFC) complete its investigations into the award of the $5m Advisory Services contract to Tsatsu Tsikata's SOG in June/July 2008 during Mr. Kufuor's Administration.

"If the IFC and the World Bank find any wrongdoing in the award of the FPSO contract, they will pull their funding which is likely to lead to the other banks doing the same. And if that happens, the best outcome is that the partners would have to do an Engineering, Procurement, Construction and Installation (EPCI) instead of a lease contract which adds US$1 billion to the cost of the jubilee project", underscored a senior official of one of the Jubilee Partners who requested anonymity.

"In the worst case scenario, what could happen is that the partners under the terms of the contract with MODEC, may exercise the option to end the contract and the FPSO will then have to leave Ghana and the project will be delayed with no first oil for at least two years if a new vessel has to be built", he warned.

An Oil Industry Insider who is closely associated with the GNPC, explained that “the fact that the Advisory Services contract between MODEC and Tsatsu Tsikata's SOG was signed just two weeks before the award of the main contract (construction of FPSO) by Tullow to MODEC in July 2008 is the basis why the shareholders led by the IFC, consider the timing suspicious. [This is] for two reasons."

"Firstly, because it occurred just before the contract award in July 2008, and secondly because at that time Tsatsu Tsikata was in jail. Also the agreement was the last document to be provided to the banks by MODEC during the bank due diligence process. This is again suspicious. The IFC and World Bank are currently investigating whether the contract was awarded in a fair and transparent manner and whether SOG had any influence in it. If they did this is not good. If they didn't then why (for what services) was so much money paid to SOG?", he queried.

The Oil Industry Insider also indicated that the IFC and World Bank, the major Jubilee Partners, Kosmos, Anadarko and Tullow were all reviewing the situation from a US FCPA and UK Bribery Act Standpoint, and that because of the delicate nature and impact of the matter, the Jubilee Partners do not want the issue to become public at this time.

The IFC and World Bank, our source further intimated, are also trying to find out who, apart from Mr Tsatsu Tsikata, owns the other 50% of SOG which is a company incorporated and existing under the laws of British Virgin Islands, having its registered office at The Mill Mall, P.O. Box 92, Wickhams, CAY I, Roadtown, Tortola, British Virgin Islands.

Our Business Intelligence Desk (BID’s) tracking the US$ 2m payment already effected to SOG showed that the first installment of $750,000 was paid on march 31, 2009; the second installment of $750,000 on July 24,2009 (a week after the jubilee field's plan of development (POD) was launched)and the third installment of $500,000 on April 30,2010 (the day Ghana’s First Lady, Mrs. Naadu Mills was commissioning the FPSO Kwame Nkrumah in far-away Singapore).

Meanwhile, a top GNPC official who spoke to our BID, on condition of strict anonymity rationalized that it was not strange for a company belonging to a person or a businessman in jail, to bid and win contracts in a competitive and transparent environment, and speculated that could have been what had happened in Mr. Tsikata's case with the Advisory Services Contract awarded to his Company in June 2008 while he was in jail.

"Yes, it is worth noting that Tsikata's company purportedly won the contract at a time the government of the day was perceived as being unfriendly to him; indeed at a time when he had been tried in the courts and had been sentenced and convicted; and at a time those in charge of the Ministry of Energy and GNPC were perceived as hostile to his interest. That his company in spite of all the heat and hurdles, could win a contract was remarkable, and perhaps, a testimony to the fairness and transparency of that period in terms of the jubilee oil field business", reflected the top GNPC official who however conceded he only got to know of SOG's operations/activities in the Jubilee Field in particular and the emergent Ghanaian oil industry in general, after the exit of the Kufuor Administration in 2001; two and half years after SOG had won the MODEC-Advisory Services Contract in June 2008.

"Perhaps, it is this situation that has raised eye brows and fueled a climate of suspicion of some irregularity. Let's all await the outcome of the IFC/WB due diligence before drawing or making definitive conclusions on the matter", he added.