Asia's big oil companies, backed by their governments, are outbidding their Western rivals

President John Evans Atta Mills, his government and the Ghana National Petroleum Corporation are entertaining offers for cooperation and a stake in the Jubilee oil field from all over Asia. Since ExxonMobil's US$4 billon offer for Kosmos Energy's 23.5% stake in the Jubilee field was rejected last month (AC Vol 51 No 17), Asian national oil companies have been doing the rounds in Accra, all aiming to become GNPC's financier and operating partner. Kosmos, however, is contemplating a listing of its shares as an alternate way to go ahead with the project.

ExxonMobil abandoned its offer on 17 August, opening the way for a GNPC bid backed by the China National Offshore Oil Corporation. Sources at GNPC told Africa-Asia Confidential that the deal would include a $5 bn. loan to the GNPC. CNOOC would take a 10% stake, another major oil company 10% and GNPC 3% of Jubilee, which is estimated to hold more than 1.2 bn. barrels of oil. CNOOC is in good odour with Accra due to previous promises by the China Development Bank to bankroll Ghana's oil infrastructure with billions of dollars in preferential loans (AAC Vol 2 No 11).

Agreement on the price of the sale could be more problematic following the 13 September confirmation by Tullow Oil of a big new discovery in the Owo field on the Deepwater Tano Block, in which Kosmos has an 18% stake. Kosmos says that the ExxonMobil offer of $4.3 bn. was under market value, and it would now prefer to sell at $5-6 bn. GNPC had offered to match ExxonMobil's offer, but Accra is wary.

Other countries are joining the fray. After the visit of Crown Prince Naruhito in March, the Japanese government made an interesting bid that would allow GNPC to buy out the Kosmos stake. Tokyo tempted the Accra government with a $1.5 bn. credit, a long-term $4 bn. loan and fewer strings than CNOOC. The Japanese side, however, brings fewer technical skills to the table.

Japanese companies already have a foothold in Ghana's oil and gas sector, albeit a tenuous one. In 2008, Mitsui Ocean Development and Engineering won a $875 mn. contract to provide oil processing facilities for the Jubilee field. But exploration financing was held up last month when the World Bank's International Finance Corporation called for new due diligence on Mitsui because it had paid $5 mn. to a consultancy part-owned by Tsatsu Tsikata, the influential member of the National Democratic Congress and former GNPC head (1998-2000).

Early at the oil and gas rush

Backed by the state-owned Japan Oil, Gas and Metals National Corporation, Mitsui owns a 20% stake in the highly prospective Keta Basin. Since October 2009, Japan's Modec-Itochu has been working on a $1 bn. gas project with Italy's Saipem, Nigeria's Oando and GNPC. The contractors will build gas pipelines, a processing plant and storage facilities. Japan's oil and gas diplomacy began in September 2008 when Yasutoshi Nishimura, Parliamentary Vice-Minister for Foreign Affairs, led a delegation to West Africa. They and GNPC agreed to look at oil and gas projects and electricity development. Japanese company Marubeni announced that it would like to set up operations in Ghana to benefit from the oil boom.

Indian Commerce Minister Anand Sharma was in Accra in early September with a delegation including representatives of the Oil and Natural Gas Corporation, ONGC-Videsh and GAIL (India). The executives discussed joint ventures in Ghana's offshore sector with GNPC. GAIL and ONGC have been in talks with GNPC since December 2009, but the talks have yet to yield tangible results. At the 2009 India-Africa Hydrocarbons Summit, Ghana's Deputy Energy Minister Emmanuel Armah-Kofi Buah was blasé about Indian overtures, saying that 'a lot of companies are interested' in Jubilee - but GNPC Chairman Ato Ahwoi has been on several official visits to New Delhi.

ONGC-Videsh was one of the first companies out of the gates in the initial phase of the Kosmos sale, but its offers have not had much play in Accra. While CNOOC had first brought in Goldman Sachs to advise on its initial bid, ONGC hired Citigroup to advise on a bid worth between $3-5 bn. in July 2009.
If Indian companies cannot get in on this round of Ghana's oil development, Delhi is keen to get ONGC-Videsh to cooperate with GNPC on future exploration projects.

After meeting Trade Minister Hannah Tetteh, Sharma offered to train Ghana's oil cadres at the Indian Institute of Petroleum. Finance Minister Kwabena Duffuor requested that Sharma get Indian companies to invest in building Ghana's capacity in the upstream and downstream oil sectors. Back in October 2004, ONGC-Videsh signed a memorandum of understanding (MoU) with GNPC for exploration and production cooperation, but it promised much and delivered little. It did, however, incorporate provisions for the training of GNPC officials in India.

State-owned Engineers India Ltd. have been trying to penetrate the Ghanaian market. The company, which builds oil platforms, oil and gas processing units and refineries, set up a Ghana office in November 2009. It started further talks with GNPC in February to work with GAIL on monetising Ghana's gas resources and building up infrastructure. Indian Petroleum Minister Murli Deora says that Delhi is keen to back its companies' development of liquified natural gas plants in Africa. The lack of a foothold in Ghana's oil and gas sector is holding back other Indian-backed projects.

In July, India's state-owned Rashtriya Chemicals and Fertilizers signed an MoU to build a $1.5 bn. gas-based fertiliser plant at Shama in Ghana's Western Region. The million-tonne-per-year plant should be in operation by 2014, but the government has not guaranteed RCF a secure source of feedstock. Earlier this year, Energy Minister Joe Oteng-Adjei emphasised that the priority for gas from Jubilee would be energy production, whereas future gas finds could be used for fertiliser and other projects. Worryingly for RCF, Oteng-Adjei said that that may take four to five years.

A lack of gas at the Chinese-built Asogli power plant delayed the plant's start-up and Asogli was inactive for over a year when it could have been producing 200 megawatts for the national grid. Production of 100 MW only began on 12 September. Asogli may not have a steady supply of gas until sometime next year.
The fertiliser project is 51% owned by GAIL and RCF, while the Ghanaian government holds the remaining shares. The project promises to have large knock-on effects for agriculture in Ghana and the rest of West Africa. It will also produce liquefied petroleum gas for the transport industry.

South Korea's Korea National Oil Corporation has also been mentioned as a strategic partner for the Accra government, but its current hostile takeover bid for Britain-based Dana Petroleum, which has assets in North and West Africa, makes its engagement in Ghana less likely. A delegation of South Korean officials were in Accra in March to discuss investment in exploration, production and downstream activities. Chief Executive KangYoung-won said that KNOC was interested in the Kosmos stake, too, but GNPC sources said Seoul's offer was contingent on the government buying back the stake.

The Korea Petroleum Association held a refining conference at Ghana's National Petroleum Association in December 2009 to announce its interest in a joint refinery project and Vice-President John Mahama met representatives of Samsung on 16 September to discuss a dedicated oil and gas port at Cape Three Points. In 2004, Seoul promised to part-finance Ghana's longest oil pipeline, which was completed in 2006. The 260-kilometre, $40 mn. Buipe-Bolgatanga Petroleum Products Pipeline was built with $38.2 mn. from Seoul. It connects the refinery in Tema to Ghana's Northern Region.

Source: http://www.africa-asia-confidential.com