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Kosmos: MODEC investigations may increase costs at Jubilee field

  • SOURCE: | Editor
  • Texas-based closely held oil company, Kosmos Energy says an investigation of MODEC, for alleged corruption could lead to extra cost at the Jubilee oil field.

    A report by the Dow Jones news service citing Kosmos Energy’s initial public offering (IPO) prospectus says the probe may hypothetically trigger an interruption of production at Ghana’s largest oil field. Commercial oil production from the field started December 15, 2010. It however, adds that interruption of production is unlikely.

    Companies listing on markets have to disclose worst case scenarios in their risk factors analysis, even if they are unlikely, the report said. And so KOSMOS cited the investigation of MODEC, the report said.

    MODEC is a Japanese contractor for the floating production and storage offloading (FPSO), facility used for oil production at the field.

    According to the report, in the document filed to the U.S. Securities and Exchange Commission January 13, Kosmos said 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,” it quoted Kosmos as saying.

    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.

    “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 company said.

    As a result of this investigation, a $225 million political insurance risk from the Multilateral Investment Guaranty Agency (MIGA) of the World Bank has been suspended, MIGA has said on its website in July 2010.

    Meanwhile, the World Bank Ghana Country Director, Ishac Diwan told ghanabusinessnews.com in December 2010, that the investigations that led to the suspension of $225 million political risk insurance for Ghana’s FPSO vessel will be completed in January 2011 and everything will normalize.
    http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=201731

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