$5bn Bid for Kosmos

The China National Offshore Oil Company (CNOOC) and the Ghana National Petroleum Corporation (GNPC) are said to have recently joined forces to bid for Kosmos Energy LLC’s assets and its stakes in the Jubilee Oilfield.

A Bloomberg report, which dropped the hint, said the fully-financed bid, pegged at $5 billion, was received about a fortnight ago. However, Bloomberg could not name the three persons, whom it claimed fed it with the information, noting that the talks on the matter were expected to be kept private.

Industry players suspect President John Atta Mills’ recent visit to China may have accentuated the move. CNOOC is China’s largest offshore oil producer. About 69 percent of its revenue comes from oil and gas fields in China, according to the company’s annual report. The energy producer also has assets in Latin America, Nigeria, Kenya, Indonesia and Australia. Oil demand in China is expected to rise 27 percent to 11.63 million barrels a day by 2015, the International Energy Agency said in June.

The latest offer tops an earlier bid of more than $4 billion from Exxon Mobil Corporation for the Kosmos assets which was thwarted by the GNPC on legal grounds. With an estimated 1.8 billion barrels of crude, oil from Jubilee could supply all U.S. East Coast refineries for more than four years.

Meanwhile, it added that GNPC was holding preliminary talks with Statoil ASA, seeking to convince Norwegian largest oil company’s interest to become a third partner in the Kosmos bid. “Compared with the Exxons and the BPs, China’s oil companies have a relatively short history in terms of operating overseas and sometimes they have to pay a premium for the quality assets that they want,” said Wang Aochao, head of China Energy Research at UOB-Kay Hian Limited in Shanghai. “Sellers know they have good financial support from the Chinese government and the real desire to acquire these assets because oil demand is growing very strongly in China.”

“This potential acquisition fits into CNOOC’S strategy,” said Wang, adding the process of acquiring assets overseas would continue, particularly in Africa and Latin America, given China’s growing need for oil. CNOOC fell 0.8 percent in Hong Kong trading to HK$15.96 at 12:29 a.m. local time, while the Hang Seng index declined 0.2 percent. The stock has gained 31 percent this year, outpacing the 8 percent advance in the benchmark gauge.

GNPC, which wants a Western company in the group, said British Petroleum Plc had originally been part of the group but backed out earlier this year to pursue other investments.

Dallas-based Kosmos, which is backed by private-equity firms Blackstone Group LP and Warburg Pincus LLP, is at the same time working with Credit Suisse Group AG and Citigroup Inc. to study a possible initial public offering of the assets, the people said. A Credit Suisse spokesman declined to comment.

Nana Asafu Ajaye, CEO of GNPC, reacting to the story stated: “Kosmos has stated they are staying on to pursue their activities in Ghana; that is the situation.” On October 12, 2009, Kosmos said it agreed to sell its Ghanaian assets, including the Jubilee stake, to Irving, Texas-Based Exxon for $3.8 billion, plus another $700 million to finance drilling. Kosmos also owns stakes in the Mahogany Deep, Odum, Tweneboa and Teak prospects offshore Ghana.

The next day, GNPC said it was still in talks with Kosmos about acquiring the assets for itself. Kosmos and Exxon canceled their deal in August. Ghana, which is set to become Africa’s newest oil exporter at the end of the year, may pump as much as 240,000 barrels of oil from its offshore Jubilee field by 2014-15 and 500,000 barrels in subsequent times. Tullow Oil Plc, the field’s operator that holds a 34.7 percent stake and other partners including GNPC and Anadarko Petroleum Corporation, and investing about $3.35 billion to develop the Jubilee field. Tullow yesterday fell to the lowest in six weeks after an exploration offshore well in Ghana failed to find oil.