<<Print>>

Ex-Ghana National Petroleum Corporation (GNPC) boss, Mr Tsatsu Tsikata, has given a different account on events leading to the sale of the drillship, Discoverer 511 by the Kufuor government to defray a US$19.5 million judgment debt owed Societe Generale, some twelve years ago.

He suggested that Albert Kan-Dapaah and Kwabena Tahir Hammond rushed in disposing off the national asset, instead doing any proper due diligence on the claims by the French bank.

Tsatsu Tsikata, also denied charges leveled against him by Mr. Kan-Dapaah and Mr. K.T Hammond, who served as Minister and Deputy Energy Minister respectively, in the Kufour administration, as the one who caused Ghana to lose it drillship, now nicknamed, Frontier Discoverer by the new Norwegian owners.

The ex-GNPC boss, revealed that prior to the sale of the drillship, Societe Generale had lost two law suits filed against GNPC and suggested that the French company was on its way, to lose for the third time the case it had filed in a UK High Court, when the Kufuor government, hurriedly sold the drillship to settle the debt, after failing to send lawyers to fight the case brought against Ghana.

Mr. Tsikata made denials, as well as revelations as far back as 2001 at a press conference, following an earlier one held on August 8, 2001, by Mr. Kan-Dapaah in which he leveled several allegations against Mr. Tsikata.

Prior to Mr. Kan-Dapaah�s press conference, a Government Spokesperson on July 27, 2001, had earlier issued a statement to the effect that, the Discoverer 511 had been sold to pay for losses incurred by Mr. Tsikata in derivatives transactions with Societe Generale, a bank Headquartered in Paris, which had obtained a judgment against GNPC in the total sum of US$47million.

According to Mr. Tsikata, �before Societe Generale brought their claim in the London High Court, they had earlier in 1998 filed a suit in the United States in the District Court in Houston-seeking an order to have the GNPC drillship, D511, moved to the US and detained by them upon conclusion of its contract in Mexico�.

�This suit was brought against the US Company that had chartered the drillship, as well as GNPC. The case of Societe Generale was thrown out and when they appealed to the Court of Appeal in New Orleans, they were again unsuccessful. It emerged in those proceedings that Societe Generale had sought legal advice about taking action in Mexico, where the drillship was operating, or in Panama where the drillship was registered, and they realised that they could not succeed in either jurisdiction if they filed a suit�, the ex-GNPC boss revealed.

According to him, �affidavits had been filed in support, including one by me. Subsequently, GNPC was instructed by Government to notify the Solicitors that the case would no longer be handled by them but by the Attorney General�s Department in Ghana�.

Though GNPC had some payment arrears in respect of the Solicitor�s fees, efforts were being made to settle these and the Solicitors continued to represent the Corporation�s interest until they received instructions to stop and hand over to the Attorney-General then led by Nana Akufo-Addo.

�The Solicitors for GNPC, therefore, obtained permission from the Court to withdraw from acting for the Corporation. The important applications they had made to the court were therefore not pursued. Obviously taking advantage of this situation, Societe General applied to the Court to make certain amendments to their case and then, thereafter, applied for judgment against GNPC. There was no representation by or on behalf of GNPC, and judgment was entered against the Corporation�.

He denied Mr. Kan-Dapaah�s claim that he (Tsikata) presented himself to Societe Generale, as �a commercial, legally trained businessman, sophisticated in terms of his understanding of derivatives trading and the theory, � as untrue.

Mt. Tsikata explained that Societe Generale rather presented itself to him in his capacity as Chief Executive of GNPC as being able to assist the Corporation with financing for its various activities, particularly the Tano Fields development, which he had indicated to them was our priority, and were invited to make presentations to other staff of GNPC.

�I did not inform them that GNPC traded in derivatives and was keen to transact business with them. Societe Generale�s expertise in relation to derivatives was one of their selling points and they provided relevant corporate information to back this�, he insisted.

�There were also ready credit lines for these transactions to be undertaken, expressly in relation to the Tano fields development and not in relation to the sale of oil on the international market. Societe Generale made it clear that financing of the sort required by GNPC would require undertaking derivatives transactions to ensure that future oil price movements do not adversely affect the ability of the Corporation to repay debts incurred on the project�.

�From the onset, I emphasised to them the need for their technical assistance in enabling GNPC achieve the objective of managing the risks involved. I specifically made requests for the training of GNPC personnel involved in these transactions and asked Societe Generale to make relevant software tools for assessing and managing the positions GNPC held�.

Societe Generale, he said �agreed to provide this help and actually trained some GNPC personnel and assisted with software and other material. Ladies and gentlemen, how then can a person who made such requests that were acceded to by Societe Generale be accused of presenting himself to Societe General as being sophisticated in terms of understanding of derivatives trading and the theory behind how derivatives work?

Mr. Tsikata noted that Mr. Kan-Dapaah his statement �chooses to quote copiously from Societe General�s self-serving statements without giving the public the benefit of knowing that these were disputed and that there was testimony in the court proceedings which contradicted these statements of Societe Generale�.

�The basic strategy for the derivative transactions was recommended by Societe Generale and they provided the credit lines for the transactions and controlled what transactions were acceptable throughout the period. At various points, they expressed satisfaction with our compliance with their recommended strategy by increasing their credit to GNPC to continue these transactions�, the ex-GNPC boss further disclosed.

�When there were delays in respect of project implementation, they were notified but that did not prevent them from giving increased credit for the transactions. It was not on the basis of any claim to infallibility about oil prices that these transactions were entered into. Rather, recognising my own fallibility and limitations as well as those of the Corporation I was heading, I sought help and guidance from Societe Generale�.

�As the Honourable Minister noted, these are complex transactions, but it is wrong to regard them as gambling. They are part of normal industry practice in the commodity world and are a regular feature of commodity financing transactions. The need to develop national expertise is clear, and we asked Societe Generale to help GNPC build this capacity, especially as it related to raising finance for a major project like the Tano Fields development. It was the failure of the strategy recommended by Societe Generale which formed the basis of GNPC�s defence and counterclaim�.

�On a regular basis, personnel of GNPC, including myself, were in contact with the Societe Generale personnel seeking advice and information. Indeed, for this reason, when Societe Generale, after the start of the transactions, presented for signature the standard form agreement and included a clause stating that GNPC had not depended on their advice in connection with these transactions, I specifically objected to it�.

He revealed further that �The lawyer from Societe Generale to whom I made the objection noted it and said she would discuss it with her colleagues and revert. Subsequently, Societe Generale took out that clause before the agreement was signed. This is all in the documents provided to the High Court in London even from the Societe Generale side�.

In respect of the mortgage that was entered into on the drillship, the mortgage document was executed expressly at the request of Societe Generale on the basis that it would enable the parties the opportunity to discuss how best to handle the situation without resort to litigation. I expressed a preference for avoiding litigation, but also made it clear that the mortgage document could not have certain provisions that Societe Generale�s lawyers proposed which would have stated certain sums to be �due and payable� to Societe Generale.

�These provisions were again omitted because of the mutual understanding about the document. All these background facts, which featured in the court proceedings in both the US and UK, are conveniently omitted from the account of this mortgage.
The circumstances in which judgement was obtained by Societe Generale against GNPC in the High Court in London were not disclosed by the Honourable Minister�.

�Hard Facts�
�The �hard facts� are as follows. GNPC had been contesting the claims of Societe Generale since the Bank instituted their action in 1999. A statement of defence and counterclaim was filed on behalf of GNPC. These were based on the fact that Societe Generale had provided negligent advice to the Corporation with regard to the strategy it recommended for the Corporation to hedge its anticipated production of oil and gas from the Tano Fields�.

�An important element of the GNPC case was the testimony of an expert on derivatives based in Chicago, Dr. Culp, who wrote a report showing that Societe Generale had acted negligently in its advice to GNPC. After the GNPC statement of defence and counterclaim papers were filed, Societe Generale requested further and better particulars and detailed answers were given in response�.

�The High Court in London held a sitting sometime last year (2000) in which it gave directions regarding the conduct of the case, especially on the exchange of documents between the parties. GNPC and its lawyers took steps to comply with the directions of the Court and, among other things, filed witness statements from relevant personnel of GNPC, including myself, regarding these transactions. Again, as required by the judicial process, GNPC and Societe Generale disclosed to each other records in the possession of each regarding the transactions. Societe Generale even demanded records on derivative transactions with two other banks, CSFB and UBS Warburg Dillon Read and these were provided�.

He further revealed that �in some of the documents disclosed by Societe Generale to the GNPC lawyers, certain passages had been blacked out because Societe Generale claimed they did not have to disclose those passages. An application was made to the court on behalf of GNPC seeking to have disclosures of some of those passages which GNPC�s lawyers considered were relevant to proving GNPC�s case. An application was also made to have tape recordings made by Societe Generale in connection with transactions disclosed. Societe Generale were claiming that almost all the tape recordings had been deleted except for a few; this did not appear satisfactory to GNPC�s lawyers, hence the application to the court for Societe Generale to disclose them�.

Corporate Transactions
�It must be emphasised that throughout the transactions with GNPC, Societe Generale had accepted that they were dealing with GNPC as a commercial body and that there was no Governmental responsibility they could fall back on. That is why the claims they were pursuing were against GNPC solely and not the Government. It appears strange to me that the Honourable Minister now completely disregards that accepted basis which Societe General has never disputed and, worse still, is accepting the claims when the Corporation detailed reasons for contesting them, and resisted the claims brought in the UK High Court� Mr. Tsikata stressed.

�Together with other personnel of GNPC, I provided the GNPC Solicitors evidence on the basis of which the defence and counter claim were filed. It is regrettable that the Honourable Minister relies on rejected allegations in Societe Generale�s case to paint a picture to the public that is far from the truth. The Honourable Minister also fails to refer to a documented acknowledgement by the Chief Executive of Societe Generale himself that the delays in the implementation of the Tano Project had created the difficulties that GNPC faced�.

Alleged Payments Denied
�Again, certain statements made by the Honourable Minister in respect of the transactions are also not true. For example, �Mr. Tsikata was paid either a premium by the Bank or he paid the Bank certain sums of money,� and �Mr. Tsikata was also paid a net premium of $8million.�

�All payments made by Societe Generale in respect of these transactions were payments to GNPC and are reflected in the accounts of GNPC as well as in the transfer instructions of Societe Generale. Anyone can go through the bank accounts of GNPC any day and see the payments from and to Societe Generale. No doubt, the forensic audit that the Honourable Minister says has been commissioned will show these funds movements which the Minister tries to portray as personal funds movements when he knows this is not the case at all�.

�What emerges from these records is that, by December 1997, prior to the sharp price movements affecting the positions held by the Corporation, GNPC had positive cash flows from the transactions with Societe Generale of about US$10 million, part of which was used for expenditures on the Tano Project and part for investments in telecommunications assets for the Corporation. I may point out that similar cashflow gains were made in the transactions with CSFB and UBS and the claims of these banks were also being negotiated with a view to a settlement. The Honourable Minister portrays the cashflow gains of the Corporation in the case of Societe Generale as �a net premium of US$8million� paid to me. This is not true�.

PERSONALISATION
�It is unfortunate that the Honourable Minister seeks to personalise completely these transactions. If the Honourable Minister really believes, however, that I just acted by myself, or that these transactions were just gambling, wouldn�t that have been the more reason to resist the claims of Societe Generale against GNPC instead of allowing them to go uncontested for judgement to be entered against the Corporation, and an asset of the Corporation arrested?

�There is no question that as Chief Executive of the Corporation, I played a leading role in respect of these transactions, but the records, including the tape recordings which GNPC�s Solicitors were asking for, indicate clearly that these were not activities that I undertook single-handed or for myself as is being claimed. Among other records made available to the Court are, for instance, records of meetings of the Risk Management Committee in GNPC, which regularly reviewed and monitored the positions arising from the derivatives transactions�.

SETTLEMENT DISCUSSIONS
�Let me also point out that discussions regarding settlement of the claims of Societe Generale had gone on both before their court actions and after. Indeed, after they started the action in London, one of their management personnel who visited Ghana as part of a French commercial delegation called on me at GNPC with the indication of their willingness to discuss settlement. I communicated this to the GNPC solicitors who began to have discussions on possible settlement. These discussions had not reached a conclusion. Societe Generale�s settlement proposal was for US$20million. This led to a counterproposal from the GNPC lawyers for a US$12million settlement payable in instalments from the expected commencement date of production from the Tano fields. Societe Generale lawyers asked for certain clarifications on this� proposal and that is where things stood.

There is no doubt that once Societe Generale obtained judgement in the absence of GNPC, it became more difficult to obtain the best price for the drillship.

�The Honourable Minister also made reference to the High Court judgement in favour of Societe Generale for the full $40million together with interest and costs �bringing,� as he put it, �Mr. Tsikata�s indebtedness to the bank to $47million.� As I pointed out earlier, if it was my personal debt there is no reason for it to be recovered from GNPC or for a GNPC asset to be seized or sold in connection with the debt. I do not accept the Societe Generale claims as legitimate. Yet, based on my alleged indebtedness, he goes on to say that, �the government despatched the Deputy Minister of Energy to London and Paris to try and reach a negotiated settlement with the bank.� Was the Deputy Minister negotiating on my behalf? The Honourable Minister states that a figure of US$19.5million in �full and final settlement of Mr. Tsikata�s indebtedness to the bank� was reached with Societe Generale by the Deputy Minister of Energy�.

DRILLSHIP VALUE
�He also states that, the drillship was sold for US$24million. According to reports in oil industry circles, it was sold for US$24million plus transaction costs. To obtain the full picture, these transaction costs must be disclosed and added, especially in making comparisons with the purchase price. It would also be important to know to whom payments have been made in respect of these transaction costs. The Honourable Minister states that �the D511 had been purchased and refurbished by GNPC in 1992 at a total cost of $25.74million� He does not say that the drillship earned income of over US$15million from operating in Mexico. The drillship was acquired for US$12million. It was used by GNPC to drill a number of wells in the Tano basin and for conducting an extended well-test for the South Tano field for some nine months during which oil was produced�.

Even if the total cost of refurbishing the rig was US$13.74 million (taking out the purchase price from the Minister�s figure), the earnings of over US$15million from the rig�s operations in Mexico cannot be disregarded in the computations. Nor can the �earnings� attributable to work done for GNPC be ignored in presenting the statement of affairs on the drillship�.

OTHER RIGS
�It needs also to be pointed out that in respect of the two rigs that were to have been used to service requirements of the Angolan national oil company, Sonangol, there was a project mobilisation payment to GNPC of some US$11million.Yet, they are among the rigs which are said never to have earned one pesewa. Nor is there acknowledgement of the US$10million insurance payment in favour of GNPC in respect of one of the rigs, which was purchased for about US$3million and which had an accident in the course of being moved to a drilling location�.

�It is a pity that the Honourable Minister seeks to dismiss these assets as �old and dilapidated� without an appreciation of the value attached to these assets, particularly in the current market. For even as old a rig as that on the Saltpond field, a value of US$500,000 was obtained by GNPC in negotiations which led to financing becoming available for the rehabilitation of the field. What does not help in the achievement of value is the kind of asset downgrade indulged in by the Honourable Minister�.

�The original purpose of acquiring these items was for projects that the Corporation was undertaking or providing services for, particularly, the Tano Project. In the case of the project in Angola, in conjunction with a U.S.-based company, we were providing equipment and services to the Angolan national oil company, Sonangol. Unfortunately, the civil war in Angola disrupted the execution of the contract and equipment of the Corporation is still in an area where it is feared there may be mines.

�In the case of the Tano Project, unexpected delays in implementation have occurred. It has been necessary to keep the equipment maintained so as to derive value from them in future use. This is still a realistic prospect. There has been interest expressed in purchase of these various assets over the years, but the uncertainties concerning the projects for which they were acquired had not made a distress disposal the best option to adopt. Market conditions for such offshore equipment have improved tremendously because of high oil prices and there are many industry projects for which these items of equipment are very suitable, and can realise significant value�.