Tsatsu Goes Wild Over $5m Oil Deal

Posted: Daily Guide |Thursday, 29 July 2010

By Charles Takyi-Boadu
Former Chief Executive Officer of the Ghana National Petroleum Corporation (GNPC), Tsatsu Tsikata, who has landed a lucrative $5million consultancy deal in Ghana’s fledgling oil industry has hit back at his critics, warning that he would not hesitate to take legal action against those making unguarded utterances about the multi-million dollar deal.

According to Tsatsu, his company’s dealings with MODEC, the Japanese company specialized in engineering, procurement, construction and installation of floating production systems, including Floating Production Storage and Offloading (FPSO) vessels, were “legitimate business”.

Tsatsu, who is said to possess a 50 percent stake in Strategic Oil and Gas Resources (StratOil), has therefore not only sought to put some degree of fear in the media, but is also seeking to gag them from prying into the activities and operations of the off-shore registered company.

According to him, he reserved the right to take legal action against those who misrepresented facts concerning the agreement between the company and MODEC.

StratOil was said to have been paid $2 million as part of the consultancy fees in the preparation of tender for the supply of an FPSO to the consortium involved in developing Ghana oil in the Western Region.

However, his dealings with MODEC are a subject of investigation by the International Finance Corporation (IFC) and the World Bank.

The IFC and the World Bank are not impressed with the circumstances under which the $5 million contract was awarded to Tsatsu’s company.

The insurance cover for the FPSO Kwame Nkrumah provided by the Multinational Insurance Guarantee Agency (MIGA) has been suspended owing to the investigations.

StratOil secured the contract somewhere in June 2008 when Tsatsu was still languishing in jail for causing financial loss to the state.

A statement issued by StratOil and signed by its Corporate Affairs Executive, Stuart Sutton-Jones, cautioned the media to desist from any reportage that would land them in trouble.

The company has therefore given consent to MODEC to make a full disclosure of the details of their ‘confidential’ agreement to all shareholders who are participating with MODEC in the equity of the FPSO Kwame Nkrumah, as well as lenders to the project.

“It is a matter of great satisfaction to StratOil that the company could play a part in enabling the tremendous achievement of MODEC in winning a highly-competitive tender and in supplying this FPSO within a time frame which is a record in the industry for such a deep water project,” the statement said.

StratOil said “it is beneficial to the Jubilee project and to Ghana that the MODEC bid was a low-priced bid that met the highest technical standards in the industry and that is enabling first oil from the Jubilee field to be achieved in the 4th quarter of this year.”

A former Energy Minister in the erstwhile Kufuor administration, Joseph Kofi Addah, has joined calls for government to institute immediate investigations into the deal, considering the issues coming out of it.

Due to MODEC’s belated disclosure to the IFC and the World Bank about the award of the $5million advisory services contract to StratOil, the two institutions were said to have taken a decision to conduct due diligence on the contract, focusing on the nature of the services provided and the basis of the award of the contract, with suspicion of underhand dealings.

MODEC’s belated disclosure on July 13, 2010, two years after the award of the contract to StratOil, also indicated that MODEC (mv21) had already paid $2million to the company whilst another $3million was slated to be paid later this year when the first oil is produced.

Reports have it that the signing of MODECs Financing Deal (Loan Agreement & Shareholders Agreement) for the Kwame Nkrumah FPSO, which was slated for July 15, 2010, had to be postponed at the request of the IFC in order to enable it to complete its investigations into the $5m advisory services contract to StratOil.

Indications are that if the IFC and the World Bank should discover any wrongdoing in the award of the contract to Tsatsu’s company, they will withdraw their funding, a situation that is likely to lead to the other banks doing the same.

Should that be the case, it is believed that the partners would have to do what is called an EPCI, a comprehensive business solution developed specifically for the oil and gas industries, instead of a lease contract which adds another US$1 billion to the cost of the jubilee project.

Other than that, the partners may exercise the option to terminate the contract and possibly compel the FPSO Kwame Nkrumah to leave Ghana, thereby leading to a delay with no first oil for at least two years if a new vessel had to be built.

However, MODEC has also issued a statement in which it is quoted as saying it is “currently undertaking due diligence of the service agreement with Strategic Oil and Gas Resources Limited”, stressing that it has “retained outside independent counsel for this purpose.”