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A shoal of indigenous minnows has been gathering alongside the wildcat explorers whose discoveries have turned the Gulf of Guinea into one of the world�s most promising offshore energy frontiers. Among these African companies are small producers from Nigeria. But others are essentially nameplates representing tiny stakes in oil prospects that span the west African coast from Angola to Mauritania. It is not unusual in the region for governments and foreign oil companies to reward services rendered during the negotiation of oil licences with �sweat equity�, as it is known in the business. But until now the practice has attracted only sporadic public scrutiny. A government investigation into the Ghanaian company EO, which hit the jackpot with a share in the largest of all recent offshore discoveries in Africa � the Jubilee oilfield � could therefore prove something of a test case. The investigation comes at a delicate moment for Ghana. Political tensions associated with the prospective oil bonanza have been testing the country�s democratic foundations before production even starts. The ongoing inquiry also risks complicating efforts by Kosmos, the Texan company which discovered oil in commercial quantities in Ghana in 2007 and sponsored EO�s stake, to cash in its share of the country�s biggest field. Kosmos, which denies any wrongdoing, is backed by US private equity groups Blackstone and Warburg Pincus. The agreement they reached last year to sell their stake in the Jubilee oilfield to ExxonMobil for $4bn � a roughly eightfold return on investment � is already subject to a dispute with the Ghana National Petroleum Corporation, the state oil company. GNPC officials allege that Kosmos infringed regulations by sharing extensive geological data with prospective buyers without informing the state company. People close to Kosmos claim the GNPC is using this issue and others to thwart the ExxonMobil deal because it wants to buy the stake at below-market value and sell it on to the Chinese. A less-publicised bone of contention has been the link between Kosmos and EO, a small company founded by two political allies of former president John Kufuor. The relationship between the two companies, both of which deny any wrongdoing, is being investigated by authorities in Ghana and the US, although the US Department of Justice has declined to confirm or deny its probe. EO was created by two US-based Ghanaians. Kwame Bawuah Edusei, the E in the company, is a medical doctor, stalwart of the former ruling party, and according to his political allies a friend of ex-president Mr Kufuor. Mr Kufuor appointed him ambassador first to Geneva and then Washington, where he served until last January. George Owusu, the O in the group, was a Houston-based businessman who worked for oil companies including as a commodities manager for Royal Dutch Shell. Until recently he was also the representative for Kosmos in Ghana. The two men played a central role in bringing the Texan company to Ghana in 2004 when interest in the country�s potential had ebbed after more than a decade of promising but inconclusive exploration along the coast. They moved the company from Ghana to the Cayman Islands where it is registered as KG (after Kwame and George) shortly before elections ended in opposition victory a year ago. Ghanaian officials suspect that EO used its political connections 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. John Craven, an Irish oil man with much experience in Ghana said his company, Ennex, withdrew from a possible deal on the same oil block in 2003. �Geologically we wanted to do the deal. We could have raised the money to do it but we were uncomfortable with EO�s demands� which included financing a share in the block and fees, he said. EO gained a stake in what turned out to be the billion-barrel plus Jubilee oilfield when it brought in Kosmos in June 2004. According to a contract seen by the Financial Times, Kosmos agreed to finance EO�s share of exploration and development costs up to the production of first oil. Payments made by Kosmos to EO, whose stake could now be worth more than $200m, are also under investigation, according to officials. Kosmos told the FT that �all payments to EO were for operational services rendered and all those fees have been exhaustively audited and documented by Ernst & Young�. A Kosmos spokesman also pointed out that no formal allegations had been made against it by the Ghanaian government or the US Department of Justice The case cuts straight across Ghana�s political divide. John Evans Atta Mills, president, won elections in December 2008 by a slim margin on an anti-corruption platform. He has since initiated investigations into several big deals signed by his predecessor. Opponents accuse Mr Mills� government of using these to pursue political vendettas. �We have no intention whatsoever of denying any person his or her right but we do think the people of Ghana must be given the true facts, in the best interest of our country,� Mr Mills told the FT recently. Supporters of the former government argue that EO seized an opportunity, received just rewards for this and for their role in the discovery of oil, an event with potential to transform the national economy. They accuse Mr Mills� government of jeopardising the investment climate by holding up Kosmos�s sale to ExxonMobil and launching several inquiries into political rivals. �I am not going to say everything was hunky dory but many of the allegations of corruption made against the last government are just that: allegations,� said Nana Akufo-Addo, the former attorney-general in the Kufuor administration and losing presidential candidate in the 2008 elections. EO�s directors declined to answer detailed questions but Mr Owusu denied categorically that there were other hidden shareholders in EO, one focus of inquiry in due diligence carried out by other companies. �The EO Group played a key role in bringing together a contractor group that discovered petroleum resources that opened a vast new component of the nation�s economy,� the group said through their Houston-based lawyer. An adviser to Mr Mills, said the Kosmos EO deal had come under scrutiny partly because of the �exceptional terms� of the contract they operate under in Ghana. But Kosmos described its terms in Ghana as only marginally more favourable than others and said this was only because the company entered the country at a time it was considered risky and before it was known there was oil. Kosmos says it did extensive due diligence on EO. This, it adds, involved thousands of hours work by US law firms, none of whom identified evidence of corrupt payments or violations of the US foreign corrupt practices act. A senior Ghanaian official, however, said that due diligence by another US investor in the Jubilee oilfield into both Kosmos and EO was one of the triggers for the current investigations. Copyright The Financial Times Limited 2010.