MIGA extends suspension of $225m political risk insurance for FPSO
The saga of the suspension of a $225 million political risk insurance for the Floating Production Storage and Offloading (FPSO) vessel that is producing oil at Ghana’s largest oil field – the Jubilee oil field does not look like it will be ending anytime soon.
The Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group and its partners have said they are extending the suspension of the $225 million political risk guarantee contract for the FPSO.
A brief statement posted on MIGA’s website Wednesday February 2, 2011 says “MIGA announced today 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.”
The statement did not give reasons for the extension.
On Thursday July 29, 2010, MIGA published a joint statement on its website announcing the suspension of the $225 million political risk insurance for the FPSO. The statement said, “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 (Strat Oil).”
When ghanabusinessnews.com enquired about progress of the investigation, Mallory L. Saleson Senior Communications Officer of MIGA said in an email response Monday September 27, 2010, “The process of looking into the issues is still ongoing. There is no conclusion yet.”
Meanwhile, Texas-based closely held oil company, Kosmos Energy has said the investigation of MODEC, for alleged corruption could lead to extra cost at the Jubilee oil field.
MODEC is a Japanese contractor for the FPSO facility.
Kosmos indicated in a document filed to the U.S. Securities and Exchange Commission January 13, 2011 that partners in the field as well as the International Finance Corp. (IFC), part of the World Bank, “are working with MODEC and its legal advisors to investigate” some “potential violations by [the contractor] under the U.S. Foreign Corrupt Practices Act.”
“As a result of these concerns, MODEC’s long-term funding from a syndicate of international banks for the repayment of funds originally loaned by [Kosmos, along with partners] Tullow Oil PLC (TLW.LN) and Anadarko Petroleum Corp. (APC) for the financing of the construction of such FPSO has been suspended pending this investigation,” Kosmos said.
Kosmos said financing for the FPSO vessel–worth $875 million–used by MODEC had been suspended pending the investigation and said partners in the Jubilee field may be required to contribute further funds as a result.
The World Bank first announced in a statement in August that MIGA had entered into the $225-million-dollar 20-year contract to provide political risk insurance for the FPSO vessel on June 30, 2010.
MODEC however has said the ongoing investigation has found no evidence of wrongdoing on its part. “This investigation has found no evidence of any violation of the U.S. Foreign Corrupt Practices Act or any other applicable jurisdiction’s anti-bribery laws in relation to its arrangement,” it said in a statement in January 2011.
The Ghana Country Director of the World Bank, Ishac Diwan however told ghanabusinessnews.com in December 2010 that the investigation that led to the suspension of the $225 million political risk insurance for the FPSO vessel will be completed in January 2011 and everything will normalize.
According to the latest statement from MIGA however, it doesn’t look like the investigation will end soon for everything to normalise.
Commercial production of oil however, which started in December 15, 2010 is ongoing with the first oil that was lifted already sold.
Due to time difference between the US and Ghana, ghanabusinessnews.com has been unable to contact MIGA officials for further clarification on the matter before publication.
By Emmanuel K. Dogbevi