Tullow looks to raise Ghana oil stake

.... Plans to buy Shares from Kufuor's Cronies

Ireland’s Tullow Oil is seeking to increase its stake in Ghana’s offshore Jubilee field through the $300m acquisition of shares controlled by allies of John Kufuor, the former president, industry officials in Ghana and London said.

Tullow’s bid is higher than offers made by other mostly Ghanaian groups in the recent past for the EO group’s 3.5 per cent stake in the West Cape Three points block, officials said.

But it would put an overall value on the Jubilee field, which spans an adjacent oil block as well, lower than what its joint venture partner, Kosmos of Texas, has sought for its own 27 percent stake in the offshore discovery made in 2007. This month, Kosmos turned down a $4.5bn offer from the state-owned Ghana National Petroleum Corporation, which was supported by China’s CNOOC and British Petroleum, say Ghanaian officials.

The Texan company, backed by Blackstone and Warburg Pincus, the private equity groups, is seeking to raise financing through a share offer.

The EO group helped Kosmos secure control in 2004 of the offshore block that yielded one of Africa’s largest recent discoveries. But it became embroiled in a dispute between the Texan company and Ghana after 2008 elections saw the government change hands.

EO is named after Kwame Bawuah Edusei, Ghana’s former ambassador to Washington, and George Owusu, a former Texas- based employee of Royal Dutch Shell who was for several years Kosmos’s country manager in Ghana.

Members of the incoming administration claimed that EO had used access to top officials in the former government to gain a hold on the offshore oil block and win more favourable terms both for themselves and Kosmos.

Mr Kufuor and both companies all denied any wrongdoing. Kosmos says it won better terms because it entered Ghana before it was known there was oil. Both the department of justice in Washington and Ghana’s government have since shelved investigations into alleged corruption.

EO has nevertheless struggled to secure financing for its share in operating costs since oil production started in December, and an agreement with Kosmos that covered initial exploration costs expired. Tullow Oil confirmed it was in preliminary discussions to acquire EO’s stake, which would increase its shares in the oil block to almost 26.5 per cent. Ghanaian officials were also aware of the negotiations, but said any deal still had significant hurdles to overcome.

Some members of the government are keen to ensure that the stake remains in Ghanaian hands. Others in government remain concerned about the political affiliations of the group. Industry officials said Tullow was considering financing the acquisition with a share swap. The shares could then be frozen until after elections in 2012, one suggested.