Ghana - IFC Investment in Kosmos Energy and Tullow Oil 

February 19, 2009 

U.S. Position 

The United States supports Ghana's efforts to develop its energy resources in a 

transparent and sustainable manner, and we wish Ghana much success in transforming 

the discovery in the Jubilee Field into sustained and shared economic growth for its 

people. 

The expensive and inconsistent supply of energy is one of the most important long-term 

constraints on Ghana’s flourishing private sector, dramatized by rolling blackouts in 

2007. Production from the Jubilee Field would diversify Ghana’s energy input sources 

and would reduce Ghana’s reliance on oil and gas supplies from its neighbors. Further, 

spikes in the oil import bill in 2008 contributed to large fiscal and current account deficits 

that now threaten hard-won gains in macroeconomic stability. Domestic hydrocarbon 

production would reduce Ghana’s vulnerability to oil price shocks, and relax a critical 

constraint on growth and poverty reduction in Ghana. 

With respect to transparency and accountability, Ghana’s vibrant democracy, active 

press, and improving governance are all indications that Ghana can avoid the “resource 

curse” that has plagued its neighbors. In this regard, the U.S. welcomes the project 

sponsors’ plans to disclose publicly information about revenue payments to the 

government, consistent with IFC policy. There is also ongoing support from multiple 

donors, including Norway, Germany and the United Kingdom, to support Ghana’s 

capacity in oil revenue management, environmental compliance, and accountability and 

transparency. Further, this investment is well-aligned with the World Bank’s Country 

Assistance Strategy, which includes support for implementation of the Extractive 

Industries Transparency Initiative (EITI) in the mining sector, as well as the Natural 

Resources and Environmental Governance Project. 

Despite our strong support for the goals of this investment, the U.S. disagrees with the 

IFC’s rationale that the environmental impact of this investment is limited, site-specific 

and can be mitigated, and the consequent classification as “Category B”. Offshore oil 

production projects are usually considered likely to have significant impacts. For these 

reasons, they are typically classified “Category A” by the World Bank (IBRD/IDA) and 

the EBRD, thus requiring a full Environmental Impact Assessment. Ghana itself requires 

an EIA for offshore drilling, and one will need to be completed prior to final government 

approval of this project. Therefore, the U.S. position is that the project should have been 

classified as “Category A,” and a full EIA should have been presented to the Board and 

the public. 

IFC's financial additionality is claimed to be as an "anchor lender" to signal confidence 

and thereby help mobilize other lenders, particularly in the current credit climate. 

However, IFC management has indicated that the two sponsors would proceed with the 

project even if IFC were to withdraw from the transaction. This would seem to negate 
the "countercyclical investment role" of IFC and raises the question of IFC's additionality 

in this project, particularly in a time of financial crisis when the marginal resources of 

international financial institutions should be directed to projects for which other financing 

sources are not available. 

A final, equally important, aspect of IFC’s additionality is environmental – holding the 

project sponsors to high standards of environmental and social risk mitigation, 

transparency, and disclosure. While the project does include a number of important 

mitigation measures, the U.S. sees three important departures from current international 

best practices. First, the use of a converted single-hulled tanker as the Floating 

Production Storage and Offloading (FPSO) facility heightens the risk of oil spills; 

international best practice mandates the use of double-hulled FPSOs. Second, the project 

will not require the practice that is consistent with high industry standards -- that the 

tankers that pick up oil be double hulled. Third, the effects of disposing non-water 

cuttings into the ocean are not well analyzed. The U.S. hopes the authorities in Ghana 

will consider these issues in its EIA. 

In light of the concerns expressed, the U.S. abstained on this investment.