Ghana Discovery Sparks Fight over Oil; Partnership with U.S.-Based Firm Collapses

Article excerpt

Byline: Chuck Neubauer, THE WASHINGTON TIMES

In 2007, in the deep waters off the coast of Ghana, a small U.S.-based oil exploration company named Kosmos Energy hit the mother lode - a vast reservoir of oil now known as the Jubilee Field. The extraordinary find was among West Africa's largest, promising to make a fortune for Ghana and Kosmos, and flaming the possibility of turning the infamous Gold Coast into a multimillion-barrel spigot of black gold.

But with the first oil production scheduled for later this year, Ghana and Kosmos are bitterly fighting over who ultimately will control the field - where up to 1.8 billion barrels worth of oil is said to be contained and with the possibility of more discoveries. The once-promising partnership is mired in a string of charges and countercharges.

Beyond the deal itself, the question remains whether Africa's latest rising star - which won the blessing of both the Obama and Bush administrations - can avoid the corruption, cronyism and bad governance that has entrapped its neighbors.

Ghana wants to block the estimated $4 billion purchase by ExxonMobil, the world's largest private oil company, of Kosmos Energy's stake in Jubilee Field. Government officials are demanding it be sold to Ghana's state-run oil company, the Ghana National Petroleum Corp. (GNPC).

Some observers say Ghana is trying to stop the ExxonMobil deal so the GNPC can buy the Kosmos stake at a reduced price and resell it to another company at a profit. A number of suitors also have shown an interest in acquiring the stake, including the Korea National Oil Corp. (KNOC), the China National Offshore Oil Corp. (CNOOC), and India's Oil and Natural Gas Corp. (ONGC).

Ghanaian President John Atta Mills' administration, according to critics, has targeted foreign companies that invested heavily in Ghana under the prior administration. Mr. Atta Mills, of the opposition National Democratic Congress (NDC) party, was narrowly elected president in a runoff election. The NDC also won a majority in parliament.

Since taking office in January 2009, critics said, the Atta Mills government repeatedly has sought to interfere with Kosmos' business, adding that it recently revoked a petroleum license for a Norwegian firm. Aker ASA recently was told by Ghanaian officials that its offshore exploration and development license - negotiated with the prior Ghanaian administration - was invalid.

Ghanaian officials maintain that Kosmos violated its contracts and the GNPC has the exclusive right to buy Kosmos' Jubilee stake - all of which Kosmos denies.

J. Peter Pham, an Africa scholar at the New York-based National Committee on American Foreign Policy, said Ghana's recent actions toward foreign investors is very worrisome, echoing what several other businessmen and scholars have said. He described the Kosmos case as the most egregious, but not the only one.

Ghana is behaving like it has the resource curse before it has even gotten any oil, said Mr. Pham, referring to a phenomenon that for some counties has meant that having a lot of natural resources has led to bad governance and left most people worse off.

A State Department spokesman said Kosmos' concerns are being taken seriously, adding that department officials have raised those concerns with the Ghanaian government.

We have conveyed to the Ghanaian government that we expect any U.S. company to be treated fairly, transparently and responsibly in accordance with Ghanaian law, said the spokesman. The Ghanaian response has generally been to acknowledge that responsibility and noting its legitimate right to apply Ghanaian law.

The spokesman said department officials - including Donald Teitelbaum, U.S. ambassador to Ghana, and Johnnie Carson, assistant secretary of state for the Bureau of African Affairs - have sought to make sure the Ghanaian government realizes the situation and its resolution reflects on Ghana's reputation as an investment destination. …