Energy giant Chevron expressed surprise after Exxon Mobil filed for arbitration to block Chevron’s proposed acquisition of Hess Corporation’s Guyana oilfield stake. The move throws a wrench into Chevron’s $53 billion deal and raises questions about the future of the Stabroek oil block, a prolific resource in Guyana.
Exxon Claims Right of First Refusal
The crux of the dispute centers on the 30% stake in the Stabroek block currently owned by Hess. Exxon, which operates the block, argues it has the right of first refusal on any sale of Hess’s stake. Chevron, however, maintains they had been in discussions with Exxon regarding the deal.
“We were surprised when they abruptly ended those discussions and publicly announced they had filed for arbitration,” stated Chevron CEO Michael Wirth during the CERAWeek energy conference in Houston.
Exxon CEO Darren Woods defended the arbitration move, claiming discussions with Chevron and Hess regarding the right of first refusal provision had stalled. “Those discussions needed to happen and hadn’t been happening,” Woods told Reuters. He added that Exxon wanted its right of first refusal recognized before finalizing its strategy for the Stabroek block. An Exxon executive estimates the arbitration process could take five to six months.
Chevron Confident in its Legal Position
Despite the surprise arbitration filing, Chevron maintains confidence in its legal position. Wirth emphasized Chevron conducted thorough due diligence on the operating agreement between Exxon and Hess in Guyana. He further stated Chevron possesses extensive experience with similar agreements worldwide.
“We are looking forward to affirming our understanding of the contract in the arbitration,” Wirth declared.
While the arbitration process unfolds, Chevron is pressing forward with other projects. Wirth acknowledged challenges with the company’s expansion project in Kazakhstan, which has exceeded timelines and budgets. However, he assured the project, expected to increase oil production at the Tengiz field to over 1 million barrels per day, remains on track for completion this year with full capacity achieved in 2025.
In the United States, Chevron is confident of reaching its target of producing 1 million barrels of oil per day in the Permian Basin by 2025.
Uncertainty Looms for Guyana Oil Development
The arbitration battle between Chevron and Exxon casts a shadow over the future development of Guyana’s oil riches. The Stabroek block is a critical resource for the South American nation, and a smooth transition in ownership is essential for continued investment and production.
A swift resolution to the arbitration is desirable for all parties involved. Transparency and a commitment to upholding the terms of the operating agreement are crucial to ensuring a stable and prosperous future for the Guyanese oil industry.
Source: Reuters
