Exxon’s Bid to Block Chevron-Hess Deal Sparks Oil Drama

A dispute over a stake in a giant Guyana oil field could derail the $53 billion merger of two U.S. energy giants

by Victor Adetimilehin

The oil industry is witnessing a high-stakes drama as Exxon Mobil, the largest U.S. oil producer, tries to spoil Chevron’s acquisition of Hess, a smaller rival with a coveted position in Guyana, one of the world’s hottest oil regions.

What is the dispute about?

Exxon and its Chinese partner CNOOC claim they have the right to buy Hess’ 30% stake in the Stabroek block, a massive offshore field that holds at least 11 billion barrels of oil and has low production costs and carbon intensity.

Chevron, the second-largest U.S. oil company, announced in October that it had agreed to buy Hess for $53 billion in an all-stock deal, aiming to boost its portfolio with Hess’ assets in Guyana and the Bakken shale in North Dakota.

But Exxon, which operates the Stabroek block with a 45% stake, said on Monday that it may exercise its pre-emption rights under the joint operating agreement, potentially blocking Chevron from acquiring Hess’ share.

Chevron and Hess disputed Exxon’s claim, saying the pre-emption right does not apply to their merger, which involves the whole company, not just the Guyana asset. They said they expect the deal to close by mid-2024 as planned.

Why does it matter?

Analysts and investors are watching the situation closely, as it could have significant implications for the future of the U.S. oil sector, which is facing pressure from low prices, environmental regulations, and competition from renewable energy.

Some experts say Exxon may be trying to extract more concessions from Chevron, such as higher commitments to the Stabroek block or other assets elsewhere. Others say Exxon may be interested in buying Hess itself, or at least increasing its stake in Guyana, where it has made 20 discoveries since 2015 and plans to produce more than 1.2 million barrels per day by 2027.

Guyana, a small South American country with a population of less than 800,000, is set to become one of the world’s top oil producers, thanks to the Stabroek block and other nearby fields. The country hopes to use the oil revenues to improve its social and economic development, while also pursuing a green agenda.

What is the outlook?

The outcome of the Exxon-Chevron-Hess dispute is uncertain, as the parties may resort to arbitration or negotiations to resolve it. But whatever happens, the drama shows how valuable and strategic Guyana’s oil is, and how much the U.S. oil majors are willing to fight for it.

Source: Reuters

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