MODEC sells FPSO to Ghana’s Jubilee partners, despite MIGA’s suspension of $225m political risk insurance

Even though, the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group and its partners have suspended a $225 million political risk insurance for the Floating Production Storage and Offloading (FPSO), MODEC has sold the vessel to Ghana’s Jubilee partners.

According to a Reuters news service report Friday January 6, 2012 citing the Ghana National Petroleum Corporation (GNPC), the Jubilee Partners, Tullow Oil, Kosmos Eergy, GNPC, Sabre Oil and Anadarko have bought the vessel known as Kwame Nkrumah which according to a source close to the deal cited by Reuters was valued at $750 million.

Mr. Thomas Manu, the Director of Explorations & Operations at the GNPC has confirmed to on the phone that MODEC has sold the FPSO to the Jubilee partners.

The vessel was leased to the Jubilee partners by MODEC for their first year of operation, the report added.

It is not clear how significant the suspension of the political risk insurance has been to the operation of the FPSO and now its sale.

In April 25, 2011, American oil company Kosmos Energy in an S-1 filing to the US Securities and Exchange Commission, complained that if MODEC, the contractor for the FPSO, fails to secure funding for the vessel which might eventually lead to lost of access to the facility, all partners in the Jubilee fields will be unable to produce hydrocarbons from the field.

“If we were unable to do so and lost access to the MODEC FPSO, we would be unable to produce hydrocarbons from the Jubilee Field unless and until we arranged access to an alternative FPSO” the Texas-based oil explorer said.

Kosmos indicated that MODEC might not be able to repay funds that were originally loaned by Tullow, Anadarko and Kosmos themselves for the financing of the construction of the FPSO which has been suspended pending investigations on allegations of corruption in Ghana against MODEC.

Kosmos Energy also 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.

MIGA which originally issued a $225 million political risk insurance for the FPSO, in a joint statement issued on its website Thursday July 29, 2010, 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).

“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,” it added.

In another brief statement posted on its website Wednesday February 2, 2011 MIGA announced an extension of the suspension. The statement partly reads, “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.”

Meanwhile, MIGA does not answer enquiries from journalists. enquiries on the matter since last year have not been responded to.

However, Mr. Manu told that to the best of his knowledge MIGA was not investigating MODEC, but instead it was the International Finance Corporation (IFC), “but nothing untoward was found,” he said.

By Emmanuel K. Dogbevi

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