Will China oil company CNOOC outbid Exxon Mobil for Ghana's oil?
Ghana will soon announce whether China oil company CNOOC or oil giant Exxon Mobil won the bidding war for rights to tap its offshore oil. The answer will show how great a player China has become in Africa.
Ghana, a flourishing English-speaking democracy with breezy weather and even breezier regulation (by regional standards), is a business beacon in West Africa, a black gold mine where waves crash over an estimated 1.8 billion barrels of crude oil.
Kosmos Energy, a small, Dallas-based exploration and production company discovered the undersea crude in 2006. Before Ghana’s government could mull over its options, Kosmos signed an agreement to transfer drilling rights to Exxon Mobil.
The battle for Africa's black gold
Exxon, the world's wealthiest oil company, is prepared pay $4 billion for the right to send deep-sea tankers and crews across ocean to pump at the deposit. However, China National Offshore Oil Corporation (CNOOC), the country's third largest national oil company, is also bidding on the site.
While CNOOC lacks Exxon's seasoned engineers and top-of-the-line technology, it boasts the backing of China's cash-flushed, oil-strapped government that is already popular with Ghanaian bureaucrats.
Oil industry insiders widely agree that Exxon's main advantage over the government-owned Chinese company is the 140-year-old conglomerate's experience pumping oil upwards from hard-to-reach sea beds, experience still valued despite the Exxon-Valdez spill in 1989.
The Chinese government faces an almost insatiable oil demand at home. In attempt to quench it, the state is prepared to finance many more hydrodams, railways, and football stadiums than the Texas oil giant.
China: Africa's new Texas
If Ghana's government decides to upend the Kosmos-Exxon deal, they would be giving CNOOC a major opportunity to prove itself in the closed circuit of offshore drilling. It may also make it difficult for Exxon to convince governments elsewhere to disregard the tempting bids of well-funded, ambitious, and increasingly experienced drillers like CNOOC.
Meanwhile, Ghana is far from the last nation in Africa likely to uncover new deposits. Neighboring Ivory Coast wants the United Nations to redraw its border with Ghana to slice off a sliver of that oil deposit. East African countries such as Uganda, Kenya, Mozambique, and Somalia are all active in the search for crude as well.
According to public records, Exxon pulls more of its oil from Africa than anywhere else, amounting to 27 percent.
With China extending its long straw into untapped seas like Ghana’s, American oil magnets may have to court the African continent a little harder.
Ghana is expected to announce its long-awaited decision soon.