Murky oil business: China, Ghana put up $5b bid for Kosmos Energy’s Jubilee stake

By Emmanuel K. Dogbevi

Ghana’s oil business is getting murkier and confusing as China’s state-owned oil producer the China National Offshore Oil Corporation (CNOOC) and Ghana’s state-owned oil producer, the Ghana National Petroleum Corporation (GNPC) are reported to have put in a $5 billion bid for Kosmos Energy’s stake in Ghana’s largest oil field, the Jubilee oil field.

Reports in the international media citing a source with knowledge of the deal say the cash bid for Kosmos’s assets and the stake in Jubilee was made about two weeks ago, but talks have seen little progress.

The sale of Texas based oil company, Kosmos Energy's stake in Jubilee has been a long running tale that seems to have no clear end, further sending confusing signals about what to expect as Ghana joins the world’s oil producers soon.

Kosmos first put up its stake in Jubilee for sale in 2009. Despite initial denials of the sale, the company was reported to have secretly opened its data room to its Texas neighbour ExxonMobil much to the consternation of the GNPC which is one of the stakeholders in the field.

Both CNOOC and ExxonMobil had earlier made $4 billion bids for the stake. It was obvious, however, that Kosmos preferred to sell to ExxonMobil while the Ghana government favours a Chinese buy. In response, the Ghana government declined approval of the ExxonMobil deal citing impropriety on the part of Kosmos Energy. Subsequently, Kosmos was subjected to investigations by the Ghana government for its conduct in the deal.

While the investigations were going on, Kosmos Energy issued a vague apology to the Ghana government – it did not say for what exactly.

In the midst of the wrangling, Kosmos Energy announced in March 2010 that it won’t sell any more. The AFP citing an unnamed official of the company reported that Kosmos Energy had rescinded its decision to sell its stake in Ghana’s Jubilee oil field.

According to the report, the official indicated that in the view of Kosmos Energy, the best option now is to stay through the production of oil from the field.

In June 2010, the government of Ghana issued a statement saying it would do‘whatever it takes within the law to protect the national interest at all times,’ in the matter of the sale of Kosmos Energy’s stake in the Jubilee oil field to ExxonMobil. This statement was issued following the completion of investigation and submission of report by the committee set up by government to investigate the Kosmos sale deal.

Even though the government said it was studying the report and would make its official position on the matter known soon, nothing has been heard since.

The latest development then raises several concerns, among which is whether indeed, there is transparency in the oil sector in Ghana and whether the government is indeed in control of the country’s nascent oil industry.

Last week, the US branch of Oxfam International announced that it was gathering 25,000 signatories online across the world to put pressure on President Obama to support tougher oil transparency in Ghana.

Meanwhile, issues of impropriety has already led to the holding of a $225 million political risk insurance for the country’s oil sector. The World Bank’s Multilateral Investment Guarantee Agency (MIGA) together with its partners suspended the guarantee contract for the Floating Production Storage and Offloading (FPSO) vessel that will produce and process oil and gas from the Jubilee offshore oil field in Ghana.

According to MIGA, the parties agreed to this suspension in order to conduct due diligence into the conditions of a service contract between MODEC and Strategic Oil and Gas Resources (Strat Oil).

Not long ago, the Ghana government suspended the signing of a $10 billion housing deal with Korean company, STX Group, because of a clause in the agreement which said Ghana’s yet to be produced oil should be used as collateral for loan for the project.

It appears that Ghanaians must brace themselves for more of such cloudy matters as commercial production of oil is set to begin either in November or December 2010.