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The battle for Guyana's oil: ExxonMobil vs Chevron and Hess
ExxonMobil, the world's largest publicly traded oil company, has filed an arbitration claim against its partner in a lucrative oil block off the coast of Guyana, potentially disrupting a US$53 billion takeover deal between Chevron and Hess.
The dispute centres on the Stabroek block, one of the world's fastest-growing major crude developments, where ExxonMobil is the operator and holds a 45% stake. Hess owns 30% of the block, while China's CNOOC has 25%.
In October 2024, Chevron announced its intention to acquire Hess in an all-stock deal valued at US$53 billion, including debt. The deal would give Chevron access to Hess' assets in Guyana, as well as in the Bakken shale, the Gulf of Mexico and other regions.
However, ExxonMobil claims that it has a right of first refusal over any change of ownership in the Stabroek block, according to a joint operating agreement with its partners. ExxonMobil argues that the Chevron-Hess deal attempts to circumvent its pre-emption rights and that it would consider matching Chevron's valuation for Hess' stake in Guyana.
On March 6, 2024, ExxonMobil filed for arbitration in the International Chamber of Commerce (ICC) in Paris, seeking to enforce its contractual rights. During a Morgan Stanley conference, ExxonMobil's senior vice president Neil Chapman said that the company is "very, very confident" in its position and understands the intent of the agreement because it wrote it.
Chevron, on the other hand, said that it is "fully committed" to the Hess deal and that it is confident in its position. Chevron also said that it expects to close the transaction on the agreed-upon terms and looks forward to working with ExxonMobil and CNOOC in Guyana.
Hess did not immediately respond to requests for comment.
The arbitration process could take months, Chapman said. Meanwhile, the deal is also subject to regulatory approvals and shareholder votes. Hess would pay Chevron a break-up fee of about US$1.7 billion if the transaction fell apart.
The outcome of the arbitration could have significant implications for the future of Guyana's oil industry, which has been transformed by a series of discoveries since 2015. The Stabroek block alone is estimated to hold more than 9 billion barrels of recoverable oil and gas resources and is expected to produce more than 1 million barrels per day by 2025.
ExxonMobil has been leading the development of the block, with five projects already sanctioned and several more planned. Chevron and Hess have also been involved in exploration and appraisal activities in other blocks in Guyana.
However, Guyana's oil wealth has also attracted geopolitical tensions, as neighbouring Venezuela claims two-thirds of its territory, including parts of its offshore zone. Venezuela has repeatedly denounced Guyana's oil deals with foreign companies as illegal and has threatened to use military force to defend its sovereignty.
Sources:
Exxon files ICC claim over US$53 billion takeover - Global Arbitration Review https://globalarbitrationreview.com/article/exxon-files-icc-claim-over-us53-billion-takeover
ExxonMobil files arbitration case for Guyanese oil field rights in blow to Chevron-Hess merger - World Oil https://www.worldoil.com/news/2024/3/6/exxonmobil-files-arbitration-case-for-guyanese-oil-field-rights-in-blow-to-chevron-hess-merger/
- ExxonMobil claims right of first refusal over Hess' stake in Guyana's Stabroek block
- Arbitration could take months and affect the deal's closing
- Guyana's oil industry faces geopolitical tensions with Venezuela
