GHANA: Energy groups lured by Ghana's Kosmos

Big international energy
groups and state-owned oil companies from China and India are circling
Kosmos Energy for its Ghanaian oilfield assets, which have been valued
at $3bn-$6bn by analysts.

The sale of Kosmos, a small exploration company financially backed by Warburg Pincus and Blackstone, is one of the industry's most closely watched deals. It will influence the future of companies such as UK-listed Tullow and Anadarko of the US, and could open an oil corridor off the west African coast, stretching as far north-west as Sierra Leone.

Neil
McMahon, analyst at Sanford Bernstein, says the Kosmos deal could be a
stepping stone for more mergers and acquisitions in the sector. "The
outcome will be very important for the evolution of the oil industry
over the next few years," he said.

"This basin is one of the
few in the last 10 years that has yielded large discoveries ... More
could come as the geology reveals itself through new seismic and
drilling data."

Big oil companies missed Ghana's potential as
they concentrated exploration efforts on Nigeria and
São Tomé e Príncipe, the island nation in the Gulf of Guinea. They have
struggled to increase production because most unexploited oil deposits
are in countries that keep their fields off limits.

Ghana's
potential oil wealth will not have gone unnoticed by the White House.
Barack Obama, US president, chose the country over Nigeria as a stop on
his July tour of Africa.

But Washington has competition from China and India. China National Offshore Oil Corporation
, the Chinese state oil company, and ONGC
of India have indicated they will bid, sources close to the companies
say. A steady oil supply from Ghana, a relatively stable country, would
satisfy both governments' aim to secure fuel supplies.

But these are lean times and several companies thought to be evaluating the assets, including
BP and Royal Dutch Shell,
may find it difficult to make such an acquisition without risking too
high a gearing, too little cash at hand and a dividend policy that
becomes too expensive to maintain.

ExxonMobil
of the US, which accumulated a $40bn cash pile during the high oil
price years and could afford the assets, may find them too small to
make a difference to its total production profile.

Much will
depend on what kind of upside a company sees in the Ghanaian field, say
several people who have seen the data on the assets. But bankers and
oil executives caution that it is difficult to tell how many companies
have accessed Kosmos's data room with a serious intention of bidding.

Other concerns include the new Ghanaian administration, which
could dramatically worsen the generous economic terms Kosmos enjoys
once a new company enters the fray. At least one oil executive who
seriously looked at the assets cites the uncertain politics, and the
possibility that the field's production could peak and decline more
quickly than expected, as reasons his company will not bid.

Ghana
is likely to favour a large international oil company that brings
expertise to develop the field, rather than a cash-rich Chinese or
Indian group.

If a company does stump up the money, it will be
largely because it believes Kosmos's geological data suggest its
Ghanaian fields are the beginning of an exciting new frontier.