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Fight For Ghana's Oil: Exxon vs China

Comment: The 3rd option:

Nana Poku Ware
2009-10-14 05:55:46
Comment to:
Fight For Ghana's Oil: Exxon vs China

At the moment, the discussion is so agitated, because there has been a breach of contract and this has led to two apparently disastrous options for Ghana:
approving the sale of Kosmos' 23 percent of Jubilee to China or Exxon for one, or buying Kosmos' shares for itself - nearly twice the size of its current stake of 14 percent. Both have downsides:
a) Unopposed selling to China or Exxon increases the risk of supporting the creation of uncontrollable foreign influence, as Kosmos and other shareholders might be tempted to sell their shares in this or other oil fields (sic!) at any time of their choosing to anyone they want. If a breach of contract has no consequences, the contract looses its essence - its binding character - so why would anyone honour it.
b) Buying this share will use up funds Ghana would need for its development or make the State and the People more dependent on and vulnerable to foreign banks, investment funds or even states funds by public borrowing, which will, in addition, lower its rating and increase tax burden now and in the years to come.

But there is a third option.
Why not counter an act of robbery and extortion - the danger of further sales of shares is looming and the development of the oilfield has not yet ended - with an act of legalized robbery and extortion ? Germany has done it quite recently with the company HypoRealEstate which was saved from bankruptcy following the financial meltdown by a forced take-over or dispossession of share holders. It is a most civilized and legal act to protect the interest of a State and its People and there are four reasons, why no international fallout will occur:
1) We are in the midst of a worldwide economic crisis. Hard measures are tolerated, because everyone fears to be forced into a similar action and will not criticise something he himself might have to do any time soon.
2) If there was a breach of contract, it has to be punishable. It is a reaction on principle which rather strengthens our international profile of being trustworthy partners.
3) We pay compensation for the 23 percent to Kosmos (slowly and much less than the $ 4 billion, but we pay something) as is legally correct in most countries, and
4) We give the 23 percent dispossessed for breach of contract to the injured party, the other shareholders, Anadarko and Tullow. And GNPC, of course.

I suggest three things will happen:
a) Kosmos will protest and try to sue the state but will fail to gather (international) support, because the other shareholders have their own interest and get their part in a 23 percent share for perhaps half the current price.
b) Kosmos will tread lightly concerning its other shares it has in other oilfields. No Investor will buy a share that may be legally dispossessed, if Ghana does not agree with the transaction.
c) As this is the cheapest option of all - no financial or political debts - politicians will be quick to embrace or reject it, based on their level of fear or determination.

I hope to invite some comments for an open discussion.

This article is closed for comments.

10-12 18:21
The 3rd option:
Nana Poku Ware
10-14 05:55