Why Exxon's Billions Won't Help It Access Oil

(MoneyWatch)  ExxonMobil has plenty of money to find and produce oil. Billions of dollars, in fact. But like other Western oil companies, Exxon is going to struggle to add to its oil reserves because it no longer calls the shots in negotiations with developing countries.

Case in point: ExxonMobil last October made what would have been its largest acquisition since its purchase of Mobil in 1998. The deal, valued around $4 billion, was for Kosmos Energy's stake in the Jubilee oil field offshore Ghana, home to one of the largest oil finds in the past decade in West Africa. It's not just that Jubilee is rich in oil deposits, something that super major oil companies like Exxon want and need. It's also desirable because Ghana is considered a relatively stable country compared to its West African neighbors like Nigeria.

The deal was soon threatened when Ghana's government expressed disappointment and called the sale illegal. Another road block was added after the state-run Ghana National Petroleum Corp. appeared ready to team up with China National Offshore Oil Corp, or CNOOC, to make a rival bid for the stake.

Months of talks ensued until last week when the government of Ghana made it official and blocked the sale to Exxon, which the WSJ reported Tuesday after reviewing the denial letter sent to the oil company. Ghanaian energy Minister Joe Oteng-Adjei said Ghana National Petroleum would be the only entity allowed to buy Kosmos stake in the Jubilee field. There are other reports that have questioned whether the deal is actually blocked or if Ghana's government has merely threatened Exxon.

Here is Exxon's problem -- and for that matter for other super major oil companies as well. They're not just fighting the governments of where the oil is located, but other state-run companies that are eager to access the world's energy resources. Take China, for example. The country has a massive energy appetite. And it is pursuing a number of avenues to access fossil fuel resources, including vying for stakes in fields offshore West Africa. And many of these countries, like Uganda, seem more willing to work with other state-run companies than international oil producers like Exxon.

The issue will only become more complex if oil prices continue to rise. Countries like Ghana that desperately want to avoid the fate of violence-plagued Nigeria, will become even more protective of their resources.

[On a side note: Exxon did make its largest acquisition in a decade last December with its $31 billion purchase (plus $10 billion in debt) of XTO Energy, a U.S.-based unconventional natural gas producer.]

See additional BNET Energy coverage of Kosmos Energy and Ghana:

• BP's Interest in Kosmos Raises Stakes for Ghana Oil Assets
• Ghana's Jubilee Field Keeps Getting Bigger, and the bidding War Does Too
• Exxon Fires Up the Acquisition Engine, Buys Kosmos' Stake in Jubilee Oil Field
• China Targets Addax, Kosmos in Overseas Asset Grab