HOUSTON -(Dow Jones)- Exxon Mobil Corp.’s (XOM) bid to pad its crude reserves by tapping Africa’s hottest new oil province is running into a familiar stumbling block: resource nationalism.
Ghana’s government has threatened to stop the U.S. oil giant’s offer to buy a $4 billion stake in the giant Jubilee field from Dallas-based Kosmos Energy LLC.
The move underscores how international oil companies no longer make the rules when it comes to exploiting new oilfields–and how Exxon, which has been successful in increasing its natural gas reserves in recent years, faces an uphill struggle when it comes to finding oil, which is more profitable.
The opposition also shows how resource nationalism remains strong–despite hopes that more moderate oil prices caused by the recession would somehow make national governments more flexible.
"National oil companies are in control and Western oil firms cannot argue with them because they will boss them around," said Fadel Gheit, analyst at Oppenheimer & Co. Inc.
Texas-based Exxon, the world’s largest publicly-traded oil company by market value, is interested in the Jubilee field as a way to carve out a foothold in the Gulf of Guinea, one of the few areas where giant-sized oil deposits are being found. The deal for Kosmos’ 23.5% stake was supposed to be Exxon’s second major purchase in a decade after the $41 billion acquisition of XTO Energy Inc. (XTO), announced in December.
But last week Ghana’s energy minister Joe Oteng-Adjei sent a letter to Exxon Mobil saying that the deal with Kosmos wouldn’t receive government approval, The Wall Street Journal reported. The letter also said that the government will only allow the state oil company, Ghana National Petroleum, to buy the stake.
Media reports later said Ghana’s government, which has been looking for partners to work with the country’s oil company, including state-run China National Offshore Oil Corp., has not blocked the transaction but that it still threatens to do so if the companies don’t abandon the deal.
Exxon is likely to look at acquiring other giant oil producing properties if the deal falls apart, "but that doesn’t mean they can do it so easily," said Phil Weiss, an analyst at Argus Research.
Exxon Mobil said it can’t comment on the details of commercial discussions or opportunities.
Resource nationalism in oil exporters from Russia to Venezuela surged when oil prices were skyrocketing over $100 a barrel. But there was the hope that the drastic drop in oil prices to less than $40 a barrel seen last year may force some national oil companies to change their minds.
Exxon Mobil Chief Executive Rex Tillerson said in March that the company was looking for opportunities with national oil companies. Chevron Corp.’s (CVX) former Chief Executive David O’Reilly also said early last year that given the need oil-rich countries have for investment, technology, and to keep their economy going, it was "the time they need companies like ours more than ever."
But the moderate rebound in oil prices, which settled Tuesday at $73.75 a barrel, shattered those hopes, Gheit said.
Analysts at UBS have said that lower oil prices have actually encouraged countries like China to go on a shopping spree for resources.
Lack of concerns about pleasing investors and a low cost of capital have allowed and will continue to allow Chinese national oil companies to be more aggressive in their effort to secure reserves, Argus’ Weiss said.
Ghana’s decision is the second recent setback for Exxon’s expansion plans in Africa, after an attempt to buy a stake in a big Uganda field fell through. Exxon Mobil is also still locked in a dispute over the nationalization of its oil ventures in Venezuela in 2007.
