The government of Ghana may kill Exxon Mobile Corp.'s (NYSE: XOM) plans to buy a $4 billion stake in a giant offshore oil discovery from Kosmos Energy LLC. The move could help China expand its growing presence in the region through its state-owned oil company China National Offshore Oil Corp. (NYSE ADR: CEO).
Ghanaian Energy Minister Joe Oteng-Adjei sent a letter to Exxon last week informing the company that the government wouldn't approve the deal with Kosmos. The letter said the government is "unable to support an Exxon Mobil acquisition of Kosmos's Ghana assets," according to a copy reviewed by The Wall Street Journal.
The government said Dallas-based Kosmos had shared critical information about the field with potential buyers without its permission. Ghana also said Kosmos had left Ghana's state-run oil company, Ghana National Petroleum Corp. (GNPC) out of discussions held to determine how the field should be developed.
The letter went on to state that GNPC would be the only entity allowed to buy Kosmos'stake in the so-called Jubilee field, saying it "supports the strategic intent and efforts of GNPC to acquire Kosmos's Ghana assets at a fair market value."
But the matter was further complicated yesterday (Tuesday) when Oteng-Adjei said Ghana had "not blocked" Exxon's bid to buy Kosmos' stake in the Jubilee field, but is waiting for Kosmos and GNPC to resolve their differences over the sale of the asset.
"Ghana is open to foreign partners working with GNPC," once those differences are resolved, Oteng-Adjei told reporters in Accra, the capital.
That clearly opens the door for China to join the fray with a competitive bid against Exxon for Kosmos' 23.5% stake in Jubilee. The new oil field is thought to hold more than 1.8 billion barrels of light, sweet crude oil, the world's most sought-after category.
Kosmos told bidders in October it had "entered into an exclusive binding agreement" with Exxon to sell the stake in Jubilee.
But the Exxon-Kosmos deal riled the Ghanaian government and GNPC, which had been trying to increase its 13.8% stake in the field. GNPC quickly announced it was teaming up with CNOOC to bid against Exxon for a stake in the giant oil find, but have apparently failed to follow through.
Kosmos has said neither the Ghanaian government nor its state-owned company has the right to "withhold consent for a technically qualified and financially capable company," The Journal reported. Kosmos is partially owned by private equity firms Blackstone Group LP (NYSE: BX) and Warburg Pincus LLC.
If Ghana does end up quashing the Kosmos-Exxon deal, it would be the second recent setback for Exxon's expansion plans in Africa, after a separate attempt to buy rights in a big Uganda field were scuttled.
"Exxon Mobil routinely evaluates potential development opportunities around the world," an Exxon spokesman wrote The Journal in an email. "We do not comment on the details of commercial discussions or opportunities."
With huge reserves in nearby Nigeria and recent discoveries in neighboring Sierra Leone, the Gulf of Guinea off West Africa has emerged as a major new oil region.
Chinese oil companies have announced plans to spend at least $16 billion to gain access to African energy assets since 2006 to help fuel its economy and bolster energy security.
In August, CNOOC entered talks with Nigeria to buy 6 billion barrels of oil – equivalent to one-sixth of the country's total reserves – which could cost between $30 billion and $50 billion.
China's oil consumption has doubled in the last decade, soaring to near 9 million barrels per day (bpd) last year from 4.2 million bpd in 1998, according to BP PLC's (NYSE ADR: BP) Statistical Review.
As it makes deals with undeveloped countries to secure those assets it also bolsters the negotiating positions of oil-rich nations, putting it at odds with Western oil companies, including Exxon Mobil, Dutch Shell PLC (NYSE ADR: RDS.A, RDS.B), Chevron Corp. (NYSE: CVX), and Total SA (NYSE: TOT).
News & Related Story Links:
- Wall Street Journal:
Ghana Blocks Exxon Oil-Field Deal
Ghana Says ‘Not Blocking' Exxon on Sale of Kosmos Assets
- Money Morning:
China Extends String of Oil Acquisitions In Ghana Deal
- Money Morning:
China Blazing Its Own Trail in Africa