Ghana’s oil production from the Jubilee Oilfields may come to a halt as issues surrounding the funding of the Floating Production Storage and Offloading (FPSO) Kwame Nkrumah vessel still remains unsolved.
Commercial production of oil on the fields began on December 15, 2011 when Ghana joined the global league of oil producing nations.
In an S-1 filing to the US Securities and Exchange Commission on April 25, 2011, Kosmos Energy reveals 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 Jubilee 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.
It added “In order to continue the production activities on the Jubilee Unit, we may be required to contribute further funds before September 15, 2011 in order to purchase the FPSO or find an alternative funding source or buyer.”
Kosmos indicates 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 also raised concerns over MODEC’s financial position. Which it thinks might be adversely affected due to the recent earthquake and tsunami affecting Japan where its mother company is located and listed on the Tokyo Stock Exchange.
“As MODEC’s parent is a Japanese company listed on the Tokyo Stock Exchange, the recent earthquake and tsunami affecting Japan and the resulting crisis concerning the Japanese nuclear power plants may adversely affect MODEC’s financial position”, the company said.
If MODEC cannot access such funding arrangements or otherwise source alternative funding, it may not be able to repay for these amounts owed to us, Kosmos said.
Meanwhile a $225 million political risk guarantee contract for the FPSO has been suspended by the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group and its partners following an investigation into the corruption allegations against MODEC.
MIGA, however, did not say for how long the suspension would last and no clear indication has been given as to when the investigation would be concluded.
Kosmos has also expressed concern about the fact that the investigation would affect its operations at the Jubilee oil field by increasing costs.