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World Bank’s $225m political risk insurance for Ghana’s oil still suspended

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The FPSO Kwame Nkrumah

Commercial production of oil in Ghana is due to start in barely two months – in November or December, but a $225 million political risk guarantee contract for the Floating Production Storage and Offloading (FPSO) vessel is still suspended.

The FPSO vessel will produce and process oil and gas from the Jubilee offshore oil field in Ghana.

The insurance cover provided by the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group and its partners was suspended in July following allegations of impropriety against some companies involved in the deal. MIGA suspended the guarantee to investigate the matter.

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.”

In a joint statement issued on MIGA’s website Thursday July 29, 2010, it 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).

Adding that “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.”

A section of the Ghanaian media says Strategic Oil and Gas, (StratOil) has been involved in a $5 million deal with MODEC a Japanese company. According to the reports, the company has been paid part of the amount after it offered consulting services in the preparation of tender for the supply of an FPSO to the consortium involved in developing the Jubilee Field.

By Emmanuel K. Dogbevi

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3 comments

  1. OOO!! Ghana, It is over 50 years of independence we product Gold, Bauxite, diamond and also produce a lot of agricultural products. But it is still surprising that each day every major investment you read about this country is being financed or backed by some outside organization and not the Ghana government. We produce gold, how many Gold reserve do we have. Why does no one no one have an answer to this simple question. Why is our currency not backed by a strong Gold. Are a country that make a decision of it own or are we just a modern day slaves.

  2. In 2009, Ghana’s economy held up relatively well in the global economic crisis. Ghana has benefited from the decline in oil imports and the firmness of earnings from its main exports, gold and cocoa, respectively 36% and 25% of sales abroad. In 2010, the economy was expected to be driven by the rebound of foreign direct investment in oil exploration and production start-up and the recovery of domestic investment especially in property, buoyed by less restrictive credit conditions. The world’s second-ranking cocoa producer, Ghana will likely be able gain ground on the world leader Côte d’Ivoire, contending the aging of its orchards. Ghana’s production is expected to continue to grow thanks to better use of fertilizers and the processing industry is expected to continue its move up market. Gold exports, meanwhile, are expected to benefit from record-breaking world prices. Inflation, which has surged to 18% in 2009 in the run-up to general elections, will likely ease below 10% thanks to tighter fiscal and monetary policy.

    Public and external accounts suffer from structural imbalances. But the government is counting on future oil revenues – expected to represent 20% of fiscal revenues and 60% of exports – to eliminate the imbalances. The IMF plans to support the country selectively via a $600 million credit line over three years at subsidized rates. Ghana can also count on the influx of foreign direct investment not only in the oil sector but also in transport and energy infrastructure to cover its external financing needs. In this context the country will likely enjoy considerable room for maneuver in obtaining financing abroad even if public buyers have to rely on subsidized-type loans. The cotton industry was thus able to renew a three-year $1.2 billion loan with an international banking consortium.

    Ghana benefits from a very good image abroad. The country has been a driving force in South-south cooperation and promoted NEPAD, the new partnership for African economic development through regional cooperation and consolidation of democracy. Ghana has also participated in many United Nations peacekeeping missions. Since gaining independence from the United Kingdom in 1956, Ghana has enjoyed a degree of political and social stability rarely achieved in Africa, marked by smooth transitions from one government administration to the next. General elections held late 2008 thus enabled John Atta Mills of the National Democratic Congress (NDC) to take power after eight years with the New Patriotic Party (NPP) running the country. And Ghana is rated among the best in Africa as regards the protection of creditors provided by the legal system and in combating corruption.

    Ghana can moreover count on extensive support from international financial backers as Obama’s visit there on his first official trip to Africa attests. . The country’s past performance notwithstanding, management of its prospective oil wealth constitutes a real risk that will bear watching.

  3. Yes we need foreign investment, that is good for Ghana. But Ghanaian Cities, Institutions, Business etc, should be able to issue Bonds, purchase by Ghanaians to finance projects and Business. Specially I want Cities, Towns and Regions to issues Bonds to finance their projects. That way we firs we have Ghanaians financing their own futures, 2nd, their have control over their own economy and 3rd, we make our own people rich. Not everything in the hands of foreigners. That can never make our own people rich. Ghana is NOT poor. We just have to do the right things.