ExxonMobil has started an arbitration process regarding its rights over Hess’s Guyana oil and gas assets, tossing some sand into the gears of rival Chevron’s pending $53 billion acquisition of Hess.
“We are engaging in arbitration because we owe it to our shareholders to protect our rights,” said ExxonMobil spokesperson Michelle Gray March 6. “We are confident in our reading of the contract we, with our initial partners, helped write and that Hess agreed to when they entered the [joint operation agreement],” she said.
“It would be irresponsible to allow 30% of a world-class operation we helped build be turned over to a 3rd party without at least considering the exercise of our contractual rights,” Gray said.
ExxonMobil senior vice president Neil Chapman said at a March 6 conference the company filed the complaint at the International Chamber of Commerce in Paris, according to media reports.
Analysts have said that Hess’s stake in the Stabroek fields in Guyana was a major motivator for Chevron to acquire Hess, in a deal that was announced in October. ExxonMobil operates the fields and holds a 45% interest in the development consortium. CNOOC, China’s largest oil and gas producer, holds the remaining 25% stake. ExxonMobil has argued that it has a right to be offered Hess’s 30% nonoperating interest in the Guyana fields.
“We remain fully committed to the transaction, and are confident in our position,” said Chevron spokesperson Braden Reddall said in an email March 6. “We look forward to closing the transaction.”
Chevron, Hess, Exxon and CNOOC have been in negotiations over the issue since sometime after Chevron’s Oct. 23 deal announcement, Reddall said in a Feb. 27 email, following news that ExxonMobil was considering arbitration. Chevron does not believe the merger with Hess triggers ExxonMobil’s or CNOOC’s option to buy Hess’ stake because of the way the merger is structured and because of the language of the joint operating agreement, he said.
“There is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction,” Reddall said.
Energy investment bank Tudor Pickering Holt analyst Jeoffrey Lambujon told his clients Feb. 27 that if the matter went to arbitration and Chevron does not prevail, the merger will be off and Chevron and Hess will continue as separate companies. There will be no break-up fee, Lambujon said.
The ExxonMobil-led Stabroek Block partners, which have made more than 30 significant discoveries, are currently producing at or near 600,000 b/d of oil from three fields: Liza Phase 1, producing about 140,000 b/d; Liza Phase 2, which is at about 245,000-250,000 b/d; and Payara, which just came online in November 2023 and by late January was already producing at its nameplate 220,000 b/d.
Hess’ share of that production was 128,000 b/d of oil in the fourth quarter of 2023, up from 116,000 b/d in the same quarter of 2022. Hess said it netted 14,000 b/d from the Payara field in the 2023 fourth quarter.
Two more Stabroek oil fields are progressing through construction: Yellowtail, slated for first oil in 2025 with capacity of 250,000 b/d, and Uaru, with the same capacity, set to debut in 2026. A sixth development, Whiptail, was submitted last year to the Guyana government for approval. Whiptail, also designed for 250,000 b/d peak capacity, would come online in 2027.
S&P Global Commodity Insights expects Guyana output to rise to 1.2 million b/d by 2030.
