Oil Bids By Exxon, China Split Ghanaians
The Ghanaian government is divided over whether to cut a deal with a leading Chinese oil company or with Exxon Mobil Corp. to develop a giant offshore oil field.
But officials in Accra, the capital of Ghana, seem to agree on one thing: They want to be done with Kosmos Energy, the tiny Dallas-based explorer that found the oil field in 2007.
Kosmos has been trying to sell its 23.5% stake in the Jubilee field off the coast of Ghana, a substantial discovery that holds an estimated 1.8 billion barrels of oil. Last week, the company entered into what it calls a binding agreement to sell its stake to Exxon http://dowjonesnews.com/newdjn/story.aspx?StoryID=PB20091013000188&TakeNo=1#Term3 , which Kosmos Chief Financial Officer Greg Dunlevy confirmed Monday in an email to The Wall Street Journal.
Exxon http://dowjonesnews.com/newdjn/story.aspx?StoryID=PB20091013000188&TakeNo=1#Term4 declined to comment, but people briefed on the deal said the price tag was about $4 billion.
However, Ghana's oil minister and Thomas Manu, head of Ghana National Petroleum Corp., said they don't consider the Kosmos- Exxon http://dowjonesnews.com/newdjn/story.aspx?StoryID=PB20091013000188&TakeNo=1#Term5 deal done and that they have the right to cancel any contract.
Mr. Manu contends that Kosmos is putting its interest in getting a good price over Ghana's interests. "Kosmos has set dangerous precedents that, if allowed to go unrectified, will do continuing damage to Ghana," Mr. Manu wrote in an email to the Journal.
Other people close to the government said Kosmos lost favor with officials when the Ghanaian energy minister felt he was insulted by a company executive during talks this summer.
Kosmos didn't respond to requests for comment.
China National Offshore Oil Corp., or Cnooc, is in advanced talks with Ghana National Petroleum Corp. to team up and make a competing offer. While no bid has been made, the possibility is being taken seriously in Ghana.
Accra is split over whether to bring in a global-oil partner from China or the U.S., according to international consultants and people in the government. Both parties have something to offer.
Some factions in Accra favor a deal with the Chinese, because that is expected to open the door to additional infrastructure loans from Beijing, said Sebastian Spio-Garbrah, an Africa analyst with the Eurasia Group, which advises corporations on overseas risk.
Others worry that a Chinese deal would delay the start of oil production at Jubilee, postponing the flow of much-needed revenue.
The government will likely favor Exxon http://dowjonesnews.com/newdjn/story.aspx?StoryID=PB20091013000188&TakeNo=1#Term6 's bid after receiving assurances "that it will quickly commence development and production . . . and generate much needed foreign-exchange revenues," Mr. Spio-Garbrah wrote in a note to clients.
Jennifer Cooke, head of the Africa program at the Center for Strategic and International Studies, said the government "is under a fair amount of budget pressure," and slashed domestic spending by 15% earlier this year to cope with declining revenue.
The Jubilee field is expected to come online in the third quarter of 2010 and eventually produce 120,000 barrels a day. Analysts say that Ghanaian officials believe bringing in Exxon http://dowjonesnews.com/newdjn/story.aspx?StoryID=PB20091013000188&TakeNo=1#Term1 is their best chance to reach that production target.
BY: RUSSELL GOLD AND WILL CONNORS