Bid for Ghana Oil Field Rebuffed

Kosmos Energy of U.S. Rejects $5 Billion Offer From Cnooc and GNPC

Ghana's state-owned oil company and China's Cnooc Ltd. made an unsuccessful joint bid of $5 billion for a U.S. company's stake in one of Africa's most promising oil regions, an official of the Ghanaian company said Monday.

The offer was for a 23.5% stake in Ghana's Jubilee field, one of the continent's largest oil deposits, and other nearby assets. The field, thought to contain 1.5 billion barrels of crude, is scheduled to start producing oil in December, heralding Ghana's entry into the ranks of Africa's major oil producers.

The stake is owned by Dallas-based Kosmos Energy LLC, which previously held talks with Exxon Mobil Corp. about the oil-field stake.

Kosmos Energy, majority owned by private-equity firms Blackstone Group LP and Warburg Pincus LLC, "has now decided to remain [in Ghana]. That is for sure," said Gabriel Q.A. Osatey, chief geophysicist of Ghana National Petroleum Corp., or GNPC, on the sidelines of an oil conference in New Delhi.

Kosmos declined to comment.

The joint bid from Cnooc and GNPC is the latest evidence of China's interest in one of the most promising frontiers for offshore oil exploration.

Exxon had discussed paying Kosmos $4 billion for its Jubilee stake, but backed out of a deal in August. The Ghanaian government had objected.

Kosmos, which is small compared with the international oil companies active in Africa, focuses on developing relatively unexplored offshore basins in West Africa. Its relations haven't always been smooth there, however.

Ghana reacted to the company's discussions with Exxon by accusing it of cutting GNPC, which holds a 13.75% stake in the Jubilee field, out of talks on the field's development and sharing information about the field with potential buyers, without state permission.

The disclosure of the failed GNPC-Cnooc bid could be a strategic move to pressure Kosmos into selling. "They are putting under the sunlight that there is a credible bid that is even higher than the one Kosmos had from Exxon," said Jefferies & Co. analyst Subash Chandra. "Everyone knows now that there is a deal on the table."

Representatives of GNPC couldn't be reached for comment.

Some analysts said that Kosmos may not be willing to sell because it deems the price offered by GNPC and Cnooc too low. Buckingham Research Group said in a note to clients in September that Anadarko Petroleum Corp.'s stake in Jubilee, which is the same as Kosmos's, has an estimated value of $6.75 billion. Other recent discoveries nearby could boost the stake's value even further.

Venture-backed companies like Kosmos that specialize in the risky oil-exploration business are usually eager to cash in on their successes before they have to put up money to develop their holdings. In the case of offshore fields, development costs can run into billions of dollars.

But Kosmos Chief Operating Officer Brian Maxted said in September the company plans to continue developing its assets in Ghana, and is preparing for the field's initial production later this year.

That could simply mean that Kosmos thinks its assets in Ghana are worth a lot more than has been offered, said Jefferies's Ms. Chandra.

In addition to Kosmos, GNPC and Anadarko, partners in the Jubilee field include Tullow Oil PLC and EO Group.

Cnooc, with the Ghanaian government's help, is likely to keep pressuring Kosmos for a deal. "It may not happen now, but I think the discussions will continue. This is not the end of the story," said Rolake Akinola, a West Africa analyst at political-risk consulting firm Eurasia Group.

In September, China Export Import Bank lent Ghana $10.4 billion for infrastructure projects, and the China Development Bank provided a separate $3 billion loan for the development of the country's oil-and-gas sector.

Fadel Gheit, an analyst at Oppenheimer Research, said Kosmos is in a difficult situation because even if the company has other potential buyers willing to pay more for its assets, Ghana's government and China, a major economic ally, will keep applying pressure to have the first option on the deal.

The majority of Cnooc's production comes from China, but the company also owns oil fields in Nigeria, Australia, Indonesia and other countries. Recently it agreed to a $2.16 billion investment in a South Texas oil-and-gas shale field, the first major U.S. foray for a state-run Chinese oil company.

Chinese national oil companies spent $9 billion in the first half of this year acquiring international assets in a move that will sharply boost their production and reserves, according energy consulting firm Wood Mackenzie.China's deep-pocketed hunt for resources comes as international oil companies such as Exxon and Chevron Corp. face an uphill struggle to secure enough oil reserves to replenish their waning inventory.

—Eric Yep and William Connors contributed to this article.