Friday, January 08, 2010

Corruption Probe Into Sale of Ghana Oil Block

Corruption probe into sale of Ghana oil block

By William Wallis, Martin Arnold and Brooke Masters in London
Published: January 7 2010 23:40

Kosmos, a Texan oil company, conducts a successful drillstem test in the Jubilee field. The ongoing Ghana investigation risks complicating efforts by Kosmos to cash in its share of the country’s biggest field

US and Ghanaian authorities are investigating corruption allegations involving a Texas oil company and the local partner that helped it secure control of the Ghanaian oil block that yielded one of Africa’s biggest recent discoveries.

The case risks complicating efforts by Texas company Kosmos to sell its stake in the Jubilee oil field to ExxonMobil in a deal valued at $4bn. Kosmos, which denies any wrongdoing, is owned by US private equity groups Blackstone and Warburg Pincus.

According to people close to the investigation, Ghana is preparing to file criminal charges against EO, a company set up by two political allies of John Kufuor, former president, whose party lost tense elections a year ago. The US justice department is also understood to be probing the relationship between EO and Kosmos, although the department on Thursday declined to confirm or deny this.

Duke Amaniampong, a California-based lawyer working for the Ghanaian investigation told the Financial Times that Ghana’s attorney-general had accumulated “enough evidence of criminal culpability to bring charges against the EO group and its directors”.

The charges would include “causing a financial loss to the state, money laundering and making false declarations to public agencies”, said a person in the attorney-general’s office.

Ghanaian officials suspect that EO used its access to top officials in the former government to gain a hold on the country’s most promising offshore oil block and win more favourable terms both for itself and Kosmos.

EO’s directors declined to answer questions but said in a statement that they had played an important role in opening Ghana’s oil industry, and had done so lawfully and without using “improper influence”.

Kosmos said allegations of wrongdoing against it were “untrue and unsubstantiated”.

Ghana, Kosmos said, now wants to secure a share of the profits by forcing Kosmos to sell itself at a knock-down price to GNPC, the state oil group, which could then sell it to the highest bidder. “Some factions in the country are clearly seeking to spread rumours and untruths in an attempt to undermine the company so that its assets can be [pushed] below fair market value,” Kosmos said.

EO was set up by a Houston-based businessman, George Owusu, who was Kosmos’s representative in Accra and Kwame Bawuah Edusei, a doctor and supporter of Mr Kufuor who was later appointed as ambassador to Washington.

The group has a 3.5 per cent stake in the offshore oil block where Kosmos first found commercial quantities of oil in 2007. EO, whose stake could be worth more than $200m, initiated the deal which brought Kosmos into Ghana three years earlier.

In return, Kosmos met EO’s share of exploration and development costs, according to an agreement between the two companies obtained by the Financial Times.

According to a senior Ghanaian official, Kosmos’s financing of EO’s costs was “widely regarded in the industry as unusual” especially as the terms of Kosmos’s deal with the government and state oil group were “more favourable [to Kosmos] than from any other agreement”.

Copyright The Financial Times Limited 2010.

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