Move Ends Talks on Chunk of Big Oil Discovery, Opens Doors for Other Players

By WILL CONNORS, SIMON HALL and DAVID WINNING

ACCRA, Ghana—Exxon Mobil Corp. said Wednesday it has canceled plans to buy $4 billion in oil assets here controlled by Kosmos Energy LLC, dealing a blow to the U.S. oil company’s drive to tap an important new oil region in West Africa and possibly triggering a scramble for a stake in a new frontier market.

“ExxonMobil has terminated the share purchase agreement with Kosmos Energy,” an Exxon spokesman said. The spokesman declined to provide further details of the talks.

The move ends fraught negotiations over a large chunk of one of the oil industry’s biggest recent discoveries and opens the door for other players—namely Chinese state-run oil company Cnooc Ltd.—to enter the Ghana oil market just months before production begins.

In June, Ghana’s state-run oil company GNPC signed an agreement with Cnooc valued at more than $4 billion to purchase the Kosmos stake, according to a person in Ghana familiar with the situation. This month, President of Ghana John Atta Mills had scheduled a meeting with the State Department’s top official for Africa, Johnnie Carson, to inform him that the government of Ghana would not approve the Exxon-Kosmos deal.

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WARRI, Nigeria — Western oil companies operating in Nigeria are racing to lock up license renewals ahead of legislation that could boost tax and royalty rates.

Amid the negotiating scramble, several big players are expected to recommit to community-development programs and local infrastructure projects. Royal Dutch Shell PLC has even agreed to offer business training to former gun-toting militants in the volatile, oil-rich Niger Delta, following a government-sponsored amnesty here.

A sense of urgency arose among the Western oil majors after the Nigerian government said earlier this year it had received an expression of interest from oil-thirsty China to buy the rights to the expiring licenses. Nigerian officials confirmed in September that China’s state-owned Cnooc Ltd. was interested in more than 20 oil blocks, including nonexpiring blocks currently operated by Western companies.

China’s chances of actually acquiring the leases from the government were never very good. Apart from legal avenues Western companies could pursue to prevent their licenses from being taken and given to the Chinese, Western operators in Nigeria have been pumping oil for years and have longstanding, though sometimes volatile, relations with Abuja.

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By Will Connors
Of THE WALL STREET JOURNAL

LAGOS, Nigeria — Kosmos Energy said Monday it signed an exclusive deal with Exxon Mobil Corp. (XOM) to sell its stake in a significant oil discovery off the coast of Ghana, the first confirmation from either company of the deal, said to be worth $4 billion.

“I can confirm that Kosmos has entered into an exclusive binding agreement with a third party (an affiliate of Exxon Mobil) in relation to the sale of its Ghana assets,” Kosmos Senior Vice President and Chief Financial Officer Greg Dunlevy said in an email to The Wall Street Journal.

The announcement comes a day after it emerged that China National Offshore Oil Corp. (CEO, 0883.HK), or Cnooc, is in advanced talks with Ghana National Petroleum Corp. to make a rival bid for Kosmos’ stake in the field, known as Jubilee.

Dunlevy did not disclose the deals’ price tag, but sources told the Journal over the weekend that the deal was worth an estimated $4 billion.

(This story and related background material will be available on The Wall Street Journal Web site, WSJ.com.)

By JEFFREY MCCRACKEN, RUSSELL GOLD And WILL CONNORS

China National Offshore Oil Corp. is in advanced talks with the Ghana National Petroleum Corp. to make a rival bid challenging Exxon Mobil Corp.’s $4 billion offer for a stake in a giant oil discovery off of West Africa, said people familiar with the matter.

A GNPC-Cnooc bid, which one person said “will be competitive to what Exxon has offered,” reflects both the Chinese government’s desire to secure access to more of the world’s oil and the Ghanaian government’s to be a larger participant in the discovery, known as Jubilee.

The emergence of Chinese companies as eager bidders for global energy assets, in Ghana and elsewhere, is a significant challenge to Western oil companies’ traditional dominance. Companies such as Cnooc are backed by a government flush with foreign currency and with a growing desire to secure long-term access to commodities. Their global ambitions are strengthening the hand of oil-rich nations in their negotiations with foreign oil companies.

Exxon and Cnooc would both be vying for Kosmos Energy’s stake in Jubilee, a discovery that is estimated to hold 1.8 billion barrels of oil. With nearby discoveries in Sierra Leone, the region is emerging as a major new oil region and Ghana is expected to be an oil exporter by the end of next year. Jubilee is one of the largest oil discoveries in recent years and holds the type of light, sweet crude oil that is most sought after by global markets.

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