You are currently viewing the printable version of this article, to return to the normal page, please click here.

ExxonMobil pulls out of $4.5 billion Ghana deal

- The Washington Times - Wednesday, August 18, 2010

The Exxon Mobil Corp. said Wednesday it has pulled out of an agreement to purchase a Texas firm's multibillion-dollar share of the oil-rich Jubilee Field off the Ghana coast - a development that follows months of resistance from the government of the West African nation.

"ExxonMobil has terminated the share purchase agreement with Kosmos Energy," said Patrick McGinn, a spokesman for ExxonMobil "We do not discuss the details of commercial agreements."

Kosmos Energy LLC, the Dallas-based oil explorer focusing on West Africa, likewise would not elaborate on the collapse of the $4.5 billion deal to sell their Ghana business to ExxonMobil, the world's largest publicly traded international oil and gas company.

In a statement, Kosmos said it would continue its exploration and development work in Ghana.

"We will continue to work with our block partners and the government of Ghana to develop these resources which we believe offer multiple near-term opportunities to significantly enhance the value of these world-class assets," said Brian F. Maxted, Kosmos' president and chief operating officer. He said the company was "very encouraged" by recent exploration results.

The transaction ran afoul of Ghanaian officials, who demanded since October when Kosmos announced its intention to sell Jubilee Field to ExxonMobil that it instead be sold to Ghana's state-run oil company, the Ghana National Petroleum Corp. (GNPC). Some observers said Ghana tried to stop the ExxonMobil deal so GNPC could buy the Kosmos stake at a reduced price and resell it to another company at a profit.

The GNPC has quietly courted a number of suitors interested in acquiring the stake, including state-owned oil companies from South Korea, India and China.

J. Peter Pham, senior vice president and director of the Africa Project at the National Committee on American Foreign Policy, said Ghana "may have won a battle only to lose the war.

"The sale of the Kosmos share in the Jubilee Field to ExxonMobil was blocked, but Ghana didn't get it either - and many analysts suspected that officials in Ghana really wanted to buy it back in order to flip it to another partner, generally thought to be China.

"Instead Kosmos is staying in Jubilee," Mr. Pham said.

The announcement came a couple weeks before Ghanaian President John Atta Mills was expected to issue his opinion on whether he would approve the sale and a month after representatives from Ghana and ExxonMobil sat down for face-to-face negotiations.

And it comes with first oil production scheduled for later this year in the field where up to 1.8 billion barrels worth of oil is said to be contained. Kosmos said the termination of the sale would not affect first oil production.

The company discovered the vast oil reservoir in the deep waters off the coast of Ghana in 2007. The find was among West Africa's largest, promising to make a fortune for Ghana and Kosmos.

However, the relationship between Ghana and Kosmos began to sour after Mr. Atta Mills' administration came to power in January 2009. Critics said the Atta Mills government repeatedly sought to interfere with Kosmos' business and targeted foreign companies that invested heavily in Ghana under the prior administration.

The Washington Times first reported in March on the dispute, which is seen as a troubling sign that the country that won the blessing of both the Obama and Bush administrations could fall prey to the corruption, cronyism and bad governance that has entrapped its neighbors.

Mr. Pham said Mr. Atta Mills "is noticeably cooler to foreign investors - and not just in the energy sector" in contrast to its predecessor.

"We have seen troubling developments in telecommunications, for example," he said. "In the case of its dealings with Kosmos, Ghana not only contested the sale of the stake in the Jubilee Field but has not too subtly raised issues with Kosmos' operations in the country. The ham-fisted tactics used to get the desired outcome will scare off new investors just at the very moment when the beginning of the production from the Jubilee Field ought to be attracting them."

While its petroleum agreements with Ghana say Kosmos cannot assign its interests without the written consent of the energy minister and the GNPC, the agreements also note that such consent "shall not be unreasonably denied, withheld or delayed."

Oil analysts said such consent generally can be denied only if the buyer company lacks the financial or technical capabilities - which would not apply to ExxonMobil.

Ghanaian officials have maintained that Kosmos violated its contracts and the GNPC had the exclusive right to buy Kosmos' Jubilee stake, which Kosmos denies. Kosmos has maintained that Ghana had no right to stop the ExxonMobil sale.

In February, Ghanaian Energy Minister Joe Oteng-Adjei sent two letters to top ExxonMobil officials, saying the government could not support the company's acquisition of Kosmos' stake and reminding the company of the "importance that we attach to companies wishing to invest in Ghana respecting our laws and the sovereignty of Ghana."

© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.