MIGA’s ‘FPSO Insurance’ On Hold

It’s Official, It’s Confirmed! Over Tsatsu’s Company Dealings

…Pending Outcome Of ‘Multiple Due Diligence’ On SOG Contract By IFC, WB, MIGA, MODEC & Jubilee Partners!

THE Multinational Investment Guarantee Agency (MIGA), a member of the World Bank Group last Thursday (July 29, 2010) formally announced the suspension of its $260 million political risk insurance (guarantee) for the FPSO Kwame Nkrumah MV21, one of the essential, central elements of the Phase One Development of the Jubilee Oil Field of Ghana.

In a joint statement, issued in Washington D.C and published on its official website (www.miga.com) on July 29, 2010, MIGA publicly disclosed that it (MIGA) and MODEC, and the latter’s wholly owned subsidiary, MV21 “TODAY MUTUALLY AGREED TO SUSPEND MIGA’S POLITICAL RISK GUARANTEE CONTRACT FOR THE FLOATING PRODUCTION, STORAGE AND OFFLOADING (FPSO) VESSEL THAT WILL PRODUCE AND PROCESS OIL AND GAS FROM THE JUBILEE OFFSHORE OIL FIELD IN GHANA”.

“THE PARTIES AGREED TO THIS SUSPENSION IN ORDER TO CONDUCT DUE DILIGENCE INTO THE CONDITIONS OF A SERVICE CONTRACT BETWEEN MODEC AND STRATEGIC OIL AND GAS RESOURCES (STRATOIL)”, the statement underscored.

“The parties note they agreed on a suspension because of the importance of the project in Ghana and their shared intention to have all issues resolved as soon as possible so that the project can be resumed”, concluded the July 29, 2010 joint statement issued and published by MIGA and MODEC/MV21

Readers will recall that The New Crusading GUIDE reported in its Tuesday’s (July 27, 2010) edition that “the Multinational Investment Guarantee Agency (MIGA) had taken a decision to suspend its insurance cover for the FPSO, apparently in response to the on-going due diligence exercise jointly being undertaken by the International Finance Corporation (IFC) and the World Bank (WB) on the Jubilee Partners’ Award of the FPSO Contract to MODEC and the latter’s award of an Advisory Services Contract to Mr. Tsatsu Tsikata’s Strategic Oil & Gas Resources (SOG) Company”.

“ONE OF THE FIRST CASUALTIES OF THE IFC/WB INVESTIGATIONS IS THE MULTINATIONAL INVESTMENT GUARANTEE AGENCY (MIGA), THE COMPANY INSURING THE FPSO. WE JUST RECEIVED A MESSAGE ON THE LINE THAT THE INSURANCE ON FPSO KWAME NKRUMAH HAS BEEN SUSPENDED UNTIL FURTHER NOTICE. SO TECHNICALLY, THE FPSO CANNOT OPERATE, VIRTUALLY ASSURING AND/OR ENSURING DELAY OF FIRST OIL”, our July 27, 2010 story quoted a source close to one of the Jubilee Partners who requested anonymity, as having confided in The Business Intelligence Desk (BID) of The New Crusading GUIDE.

The story under reference attracted emphatic denials from the Chief Executive of the State Insurance Corporation, Mr. Benard Acolatse and the Executive Secretary of the Insurers Association of Ghana, Mr. Atsu Menyawovor on various radio networks including CITI FM, JOY FM and Oman FM.

The denials by the two gentlemen subsequently found widespread expression in sections of the print media.

Though The New Crusading GUIDE subsequently in its Wednesday July 28, 2010 edition, provided more details to authenticate and substantiate its Tuesday (July 27, 2010) publication that MIGA had suspended its insurance cover for the FPSO, there were many out there who met that publication with cynicism and skepticism because of the earlier denials by the two Insurance Professionals.

The cynicism and skepticism appeared to hold because as Mr. Atsu Menyawovor had indicated in his interview with JOY FM’s Super Morning Show (SMS) host, Kojo Oppong-Nkrumah, “the FPSO is insured by a consortium of Ghanaian insurance companies and the State Insurance Company (SIC) are the managers of the Consortium. So I called them (SIC) to check and as at this morning (July 27, 2010) the FPSO is insured and re-insured and the insurance is in place. It has not been suspended”.

However, subsequent events as captured by The New Crusading GUIDE last Wednesday (July 28, 2010) and on MIGA’s own website as reported in today’s edition, clearly show that the two insurance professionals were not exactly reacting to the actual import or substance of The New Crusading GUIDE’s story which was about the suspension of MIGA’s political risk insurance (guarantee) on the FPSO, and not the insurance cover provided by the consortium of Ghanaian insurance companies for the FPSO, which according to Mr. Menyawovor “the African Market has 5% of the insurance and the London market has 95%”.

As reported in our Wednesday (July 28, 2010) edition, top officials of MODEC and GNPC had, on July 23, 2010, informed the Jubilee Partners and the GNPC that MIGA had decided to “TAKE A PROVISIONAL ACTION ON ITS GUARANTEE CONTRACT WHICH HAS BEEN EFFECTIVE SINCE JUNE 30, 2010. THE SAID ACTION IS A SUSPENSION OF THE GUARANTEE STARTING TODAY (JULY 23, 2010) UNTIL THE DUE DILIGENCE IS COMPLETED”.

“They (MIGA) say they do not want to make an immediate termination of the Guarantee Contract but for mutual benefit would propose suspension as a mitigated way”, we (The New Crusading GUIDE) reported MODEC officials as communicating to the Jubilee Partners and the GNPC.

We also reported that MIGA had indicated to MODEC that if it (MIGA) had known about the StratOil issue before signing the $260 million Guarantee Contract, it (MIGA) would have undertaken the same due diligence that the IFC was doing.

“MIGA BELIEVES THAT CONTRACTUALLY MIGA CAN TERMINATE THE GUARANTEE CONTRACT BUT UNDER THE UNCERTAIN SITUATION OF THE SOG ISSUE, MIGA MANAGEMENT AGREED TO MAKE A SPECIAL COMPROMISE TO SUSPEND THE GUARANTEE CONTRACT UNTIL THE SOG ISSUE IS SOLVED, CONSIDERING THE IMPORTANCE OF THE PROJECT AND RELATIONSHIP WITH ALL PARTIES”, MODEC was quoted as having told the Jubilee Partners and GNPC.

The New Crusading GUIDE’s Wednesday (July 28, 2010) report also disclosed that a draft suspension agreement was to be made available to MODEC by MIGA on Monday, July 26, 2010 and that it would in turn be transferred to Tullow upon receipt for its (Tullow’s) attention.

Few days after The New Crusading GUIDE broke the IFC/WB ‘SOG Due Diligence’ (Monday, July 26, 2010) and ‘MIGA FPSO Insurance Suspension’ (July 27 & 28, 2010) stories and despite all the blistering attacks on our personal and corporate credibility/integrity and the denials of the stories by a motley group of people and propagandists sympathetic to Mr. Tsatsu Tsikata and his StratOil, slowly but surely, the facts are being separated from fiction.

Now the whole world knows that:

*(1) Yes, the IFC/WB, MODEC, MIGA and the Jubilee Partners (with the possible exception of the GNPC) are all conducting separate due diligence exercises on MODEC’s award of a services contract to Mr. Tsatsu Tsikata’s StratOil which was belatedly disclosed to IFC and other equity holders in the FPSO project on July 13, 2010; two clear years after the award of the said contract. The focus of the due diligence is “on the nature of the services provided and the basis of the award of the contract”.

*(2) Yes, MIGA has formally announced a suspension of its $260m political risk insurance (guarantee cover) for the FPSO; the MIGA facility, according to MODEC, is essential for lease financing of the project.

*(3)Yes, the IFC is also conducting due diligence on the Jubilee Partners’ 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 how much influence Tsatsu Tsikata/SOG had in enabling MODEC obtain a competitive advantage”.

*(4) Yes, the execution of the MODEC Financing Deal which had been scheduled for July 15, 2010, was deferred at the request of the IFC to enable it complete its due diligence. The implication was (is) that the Loan Agreement & Shareholders Agreement slated for July 15, 2010 also had to be postponed until after due diligence exercise is completed.

*(5) Yes, “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 EPCI instead of a lease contract which adds US$1 billion to the cost of the Jubilee Project”.

*(6) Yes, “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”.

*(7) Yes, Tsatsu Tsikata’s StratOil has confirmed being a ‘beneficiary’ of a services contract awarded in June 2008 by MODEC, and by implication the receipt of a $ 2 million part payment of a $5m worth deal as reported by The New Crusading GUIDE. The payments were effected in the following order: First Instalment of $750,000 (March 31, 2009); Second Instalment of $750,000 (July 24, 2009); and Third Instalment of $500,000 (April 30, 2010). The Final payment of $3 million is to be effected at First Oil (possibly November 2010).

*(8) Yes, there’s a search and a demand for the disclosure of the identity or identities of the other 50% shareholders of StratOil by the IFC and the Jubilee Partners

*(9) Yes, a 12 point questionnaire has been dispatched to MODEC for their attention as part of the Due Diligence Exercise (See Ghanaian Observer, July 27, 2010 for the full details).

*(10) Yes, MODEC by not relying on their own in-house legal team but on an independent counsel to represent them in the IFC/WB due diligence exercise, are anticipating difficult and tough questions being asked and clearly believe a robust defence may well be necessary.

The preceding facts, indicators and scenarios in totality, reflect the reality of the situation in which the FPSO Kwame Nkrumah Project has found itself since July 13, 2010 when MODEC’s Advisory Services Contract with SOG was belatedly disclosed to the IFC/WB and the Jubilee Partners.

There is nothing in the above 10 point presentation that arose out of the ‘fertile imagination’ of The New Crusading GUIDE or its Editor-In-Chief, Abdul Malik Kweku Baako as ‘some Tsatsu Tsikata/SOG sympathizers’ and their ‘media surrogates’ have peddled since The New Crusading GUIDE’s July 26, 2010 story titled: “Alarm Blows Over FPSO Kwame Nkrumah Contract: “TSIKATA ‘GRABS’ $5m DEAL … But IFC & World Bank Suspect ‘Kululu’ & Initiate ‘Forensic Probe’ Into How MODEC Awarded Contract To His Company (SOG) in June 2008”, hit the newsstands and airwaves.

“We are not and can never be bothered by the infantile, desperate and intellectually dishonest attacks on our professional integrity and the credibility of our stories on the IFC/MODEC/MIGA/SOG/FPSO Saga. Those media practitioners and politicians who seek to defend Tsatsu Tsikata and his SOG on the issues we have raised and will continue to raise, are entitled to their opinions and flights of imagination but not to their own set of facts. Yes, we have the relevant documents to support our stories, and we shall continue to perform our public service by putting out the details as and when we feel compelled to do so. Let those who shout and hurl invectives such as ‘Kosmos Conspiracy’, ‘CIA/Imperialist maneuver’, ‘reactionary/unpatriotic stooges’ at us and others who do not share their views and positions continue in their ways. Time will tell”, underscored our Editor-In-Chief in reaction to the recent spate of attacks on him and this paper.

Stay tuned for more ‘explosives’ & ‘exclusives’ on Ghana’s Jubilee Oil Field and related activities.