Round 2: China and India back in for Ghana’s Oil.
A new spate of takeovers shows that West African oil is still a top priority for Asian powers. Moves for Kosmos, Tullow and Addax are all on the cards as India and especially China look to expand and deepen their foot print in Africa. After the failure to win the original contracts in Ghana, a new policy of buying established foreign companies is being enacted to secure burgeoning oil reserves.
In August 2008 a team of Chinese officials lead by China People’s Political Consultative Committee heavyweight Zhu Welin, arrived in Ghana. Their task was to secure extraction rights to oil blocks on behalf on the China National Offshore Oil Corporation (CNOOC). The company had previously failed to find oil in one of the exploration blocks in which Tullow were later successful, and Chinese officials were understood to be greatly aggrieved by the missed opportunity.
Meanwhile in the capital Accra, Indian contractors completed a striking new government building, while the Chinese government donated $5m of the $6.75m budget for Ghana’s new Ministry of Defense, built by Qingdao construction group. These projects represent the rising powers’ competing interests in securing Ghana’s favour. Beijing and Delhi are particularly attracted to Ghana internationally recognized democratic and relatively uncorrupt politics and economy as well as its soon to be realised oil wealth.
The real prize for foreign investors has been this discovery off shore oil where British and American partners outbid Asian rivals in negotiations last year. The major contracts were awarded to London based Tullow Oil, US based Kosmos energy and Andarko Petroleum Corporation. However it remains to be seen whether President John Atta-Mills will be able to harness the oil potential for the country’s benefit, or whether Ghana will become yet another casualty of the resource curse.
China and India will be using the hoping to gain a foothold by developing the relationship with the new President as he seeks to reorganize some of the larger government contracts. Recently Atta-Mills replaced the rival NPP party’s favoured Fred Oware in his role running the Bui hydroelectric Dam project replacing him with an energy expert and NDC favourite Jabesh Amissah-Arthur. The Bui Dam project is being administered by Chinese firm Sinohydro.
During the bidding process last year for Ghana’s new oil finds, the bulk of the contracts were won by American and British firms. In the West Cape Three Points Block the breakdown was, Kosmos (30.875%), US company Andarko Oil (30.875%), Tullow Oil (22.896%), Ghanaian E.O. Group (3.5%), Sabre Oil (1.854%) and the Ghana National Petroleum Corporation (10%). In the Deepwater Tano Licence the breakdown was Tullow Oil (49.95%), Kosmos (18%), Andarko (18%), Sabre Oil (4.05%) and the Ghana National Petroleum Corporation (10%).
However times have changed and expansionist Western investment in far flung reaches of the world is no longer a la mode. The recent trend has seen Chinese and Indian companies bid for established foreign heavyweights as it seeks a new route into more attractive markets. Other examples include the failed Chinalco deal for Rio Tinto and Tengzhong Heavy Industrial Machinery Company’s ongoing deal for General Motor’s Hummer brand. Meanwhile Indian Bharti Airtel is close to sealing a deal for South African MTN under the noses of Chinese rivals.
Chinese power brokers have decided that Ghana’s oil reserves are a particularly important to Beijing’s energy policy. Plan B it seems, is to buy controlling stakes in the successful western companies that won contracts in the new Ghanaian oil fields. CNOOC’s takeover move for Kosmos energy looks imminent as the Africa focused, private equity backed oil and gas company hired Standard Chartered and Barclays to sell its stakes in the Jubilee oil field. CNOOC had enlisted Goldman Sachs in an advisory capacity to help them in their pursuit of Kosmos energy. However other bidders include ONGC of India.
CNOOC have also been tracking Tullow since last December although the current ownership has so far been reluctant to sell. There have been rumours of a Chinese bid and Tullow’s willingness to sell although nothing concrete has emerged as yet. Elsewhere in Africa another Chinese Oil firm Sinopec is looking to aquire Addax Petroleum, a London listed group with interests in Nigeria, Iraq and Kurdistan. Sinopec’s only other foreign operation is its small interest in the Sudan, but rumours abound that Sinopec has bid anything between £4.8bn and £8bn for the American firm trumping an earlier bid by the Korean National Oil Corporation.
As developed western economies toil in the economic downturn, developing countries enjoying budget surpluses will be looking, in all senses, to capitalise. This period could see a redefinition of Asia’s role in Africa as they begin to take key roles in more attractive investment environments, diluting the criticism they have received in their dealings with human rights abusers and autocrats, and garnering greater returns for the parent companies.
The Industrial and Commercial Bank of China’s deal for 25% of Standard Bank may prove a blueprint for successful South-South cooperation in the premier oil markets of Africa. The partnership has recently yielded big returns for both of the partners and it looks likely that the next phase of China’s involvement on the African continent will centre on Chinese buy outs of western majors with significant interest on the continent.
China has been trying to secure its role in the major west African oil markets of Ghana and Nigeria for a number of years. These takeovers seat China securely at the top table of African business and have implications regarding US energy security. The gulf of Guinea is an important strut in the US oil infrastructure as a vital alternative to political uncertainty in middle eastern oil producers. China is now constructing an impressive portfolio achieving its aim of becoming a major player in world oil markets.