The government is divided over whether to cut a deal with a leading Chinese oil company or with Exxon Mobil Corp. to develop a giant offshore oil field.

But govt officials seem to agree on one thing: They want to be done with Kosmos Energy, the tiny Dallas-based explorer that found the oil field in 2007.

Kosmos has been trying to sell its 23.5% stake in the Jubilee field off the coast of Ghana, a substantial discovery that holds an estimated 1.8 billion barrels of oil. Last week, the company entered into what it calls a binding agreement to sell its stake to Exxon for a price tag of about $4 billion.

However, Ghana's oil minister and Thomas Manu, head of Ghana National Petroleum Corp., said they don't consider the Kosmos-Exxon deal done and that they have the right to cancel any contract.

Mr. Manu contends that Kosmos is putting its interest in getting a good price over Ghana's interests. "Kosmos has set dangerous precedents that, if allowed to go unrectified, will do continuing damage to Ghana," Mr. Manu wrote in an email to the Journal.

Other people close to the government said Kosmos lost favor with officials when the Ghanaian energy minister felt he was insulted by a company executive during talks this summer.

Kosmos didn't respond to requests for comment.

China National Offshore Oil Corp., or Cnooc, is in advanced talks with Ghana National Petroleum Corp. to team up and make a competing offer. While no bid has been made, the possibility is being taken seriously in Ghana.

Accra is split over whether to bring in a global-oil partner from China or the U.S., according to international consultants and people in the government. Both parties have something to offer.

Both global powerhouses are interested in deepening relations with the West African nation.Some factions in Accra favor a deal with the Chinese, because that is expected to open the door to additional infrastructure loans from Beijing, said Sebastian Spio-Garbrah, an Africa analyst with the Eurasia Group, which advises corporations on overseas risk.

Others worry that a Chinese deal would delay the start of oil production at Jubilee, postponing the flow of much-needed revenue.

The government will likely favor Exxon's bid after receiving assurances "that it will quickly commence development and production... and generate much needed foreign-exchange revenues," Mr. Spio-Garbrah wrote in a note to clients.

Jennifer Cooke, head of the Africa program at the Center for Strategic and International Studies, said the government "is under a fair amount of budget pressure," and slashed domestic spending by 15% earlier this year to cope with declining revenue.

The Jubilee field is expected to come online in the third quarter of 2010 and eventually produce 120,000 barrels a day. Analysts say that Ghanaian officials believe bringing in Exxon is their best chance to reach that production target.

Kosmos to sell Ghana oil stake to Exxon Mobil: WSJ

A Kosmos official confirmed that the energy firm has a "binding deal" in place to sell an interest in the potentially vast Jubilee oil field in offshore Ghana to oil major Exxon Mobil.

The deal -- valued at an estimated $4 billion -- would mark Exxon Mobil's largest acquisition in about a decade.

It comes amid reports that China National Offshore Oil Corp. (CNOOC) - see report below - could also bid on assets off the coast of Ghana.

Kosmos Vice President and Chief Financial Officer Greg Dunlevy said in an e-mail to MarketWatch, "I can confirm that Kosmos has entered into an exclusive, binding agreement with (an affiliate of Exxon Mobil) to make a rival bid for Kosmos' stake in the field, known as Jubilee."

Kosmos owns 23.5% of Jubliee, with Tullow Oil holding nearly 35% and Anadarko Petroleum owning 24%. The Ghana government owns about 14%. Oil companies have said it'll cost about $3 billion to develop Jubilee.

Officials in Ghana have said in press reports that they have not approved any transaction.

None of the five Western oil majors -- BP, Exxon, Royal Dutch Shell, Chevron or ConocoPhillips have gotten involved in the Jubilee field, until now.

Big petroleum producers, faced with dwindling reserves at aging fields, have been keeping an eye on the mostly untapped waters off the west coast of Africa, near Sierra Leone, Ghana and other nearby nations.

Last month, Anadarko Petroleum announced a find off the coast of Sierra Leone, feeding hopes of a 700-mile stretch of prospects starting at Jubilee and going west.

CNOOC, Ghana petroleum co in talks on Kosmos bid: report

China National Offshore Oil Corp is in talks with State-run Ghana National Petroleum Corp to bid for a stake in a large oil discovery off West Africa, the Wall Street Journal reported on Monday, citing unnamed sources.

The offer for Kosmos Energy's stake in the discovery, Jubilee, would rival a $4 billion bid by Exxon Mobil Corp, the Journal said. The paper said CNOOC and GNPC plan to submit a strong competing bid in the next few days, citing one person familiar with the matter.

According to the Journal, the Chinese company sent some senior officials to Ghana several weeks ago, including CNOOC Chairman Fu Chengyu. The paper said CNOOC committed to an equity stake for GNPC in the deal and discussed helping the Ghanaians develop their national oil company.

Dallas-based Kosmos confirmed on Monday that it had agreed to sell its 23.5 percent stake in Jubilee to Exxon, the Journal said. Kosmos is backed by private-equity firms Blackstone Group and Warburg Pincus .

The GNPC source indicated the company could ultimately sell on any interest gained, while a separate source close to the matter said GNPC's desire for a role "can be accommodated."

Ghana has hired Morgan Stanley as its investment banker to advise it on the process.

Kosmos's Ghana sale bid "illegal" -GNPC source

State-run Ghana National Petroleum Corp (GNPC) believes Kosmos Energy's deal to sell its stake in the huge Jubilee oil field to Exxon Mobil (XOM.N) is illegal and is ready to buy the stake itself, a GNPC source said on Monday.

Ghana has received expressions of interest from the China National Offshore Oil Corp for Kosmos's stake, according to the source, who declined to be named. But the West African state is ready and able to make the purchase on its own, and would decide later with whom to partner.

The Jubilee field is one of the largest oil finds in West Africa in the past decade and sources said last week that Exxon Mobil had reached a multibillion-dollar agreement with Kosmos to buy its stake in the field.

"We have formally notified (Kosmos) that we do not recognise whatever agreement they reached with Exxon -- we told them we disapprove of it because it's illegal," the GNPC source said.

The source said Kosmos had violated Ghanaian laws when it shared confidential exploration data with over 20 companies for its own commercial purposes without giving the GNPC any prior notification.

Ghana is due to start pumping oil from Jubilee in late 2010 and the country's oil finds and relative stability in a turbulent region are luring investors.

Kosmos, which is backed by private equity groups Blackstone Group (BX.N) and Warburg Pincus [WP.UL], has a 30.875 percent stake in the West Cape Three Points block and an 18 percent interest in the Deepwater Tano block offshore Ghana.
The source dismissed analyst doubts over whether Ghana's cash-strapped government would be able to raise the billions of funds needed to buy Kosmos's entire stake.
"We have the money ready to buy all the shares of Kosmos," the source said, adding that the GNPC was confident of acquiring the stake.
The Wall Street Journal reported on Monday that China's CNOOC was in talks with Ghana to rival Exxon Mobil's $4 billion bid for Kosmos's stake in Jubilee.
The GNPC source confirmed that the CNOOC was interested.
"But as far as GNPC is concerned, that also remains only as an expression of interest, like many other companies ... It could be any company -- it could be the Chinese, it could be Exxon," the source said.
Kosmos owns the field with UK-based oil explorer Tullow Oil and Houston-based Anadarko Petroleum ). It put its interest in the field on the market earlier this year.