VP Jagdeo welcomes Chevron’s takeover of ExxonM’s partner

Oct 27, 2023 ExxonMobil, News, Oil & Gas

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– says company’s deep pockets will help Guyana meet peak production as fast as possible

By Kiana Wilburg

Kaieteur News – Vice President, Dr. Bharrat Jagdeo said on Thursday he welcomes the recent announcement by American multinational Chevron Corporation that it will be taking over Hess Corporation, giving it access to a grand prize—Hess’s 30 percent stake in the Stabroek Block.

Jagdeo noted during a press engagement yesterday that Chevron is the second largest oil producer in the USA and brings “deep pockets” to the table which can help Guyana meet peak production at the Stabroek Block as fast as possible. In the Stabroek concession, ExxonMobil is the operator and is targeting a massive oil production output of 1.2 million barrels of oil by 2027.

Since the disclosure of the merger which takes effect in the first quarter of 2024, Jagdeo said there have been several media reports highlighting Guyana as the crown-jewel of the industry and a grand prize of the Chevron-Hess deal. He said such reports demonstrate Guyana’s growing importance to major industry players that are hunting for the best barrels with the best returns. “The fact that Guyana is an attractive destination for investments is something we should all be happy about. You have seen globally, a move now by both Exxon and Chevron, the two biggest companies in the USA, to consolidate and acquire new assets because they are calculating that the global demand for fossil fuels will stay with us for a long time in the future,” the Vice President said.

While there has been an ongoing push for Guyana, and the world over, to invest heavily in renewable sources of energy like solar, Jagdeo said the reality of the day is that infrastructure to convert those resources into power cannot be done at a scale and pace that is as affordable as fossil fuels. He said this is even supported by the International Energy Agency (IEA), a leading authority on energy matters. “The IEA’s finding is that although we are moving at a fast pace to introduce renewables, the demand (for energy) is so robust now that demand for fossil fuel will remain high because the renewables cannot be introduced at the scale and pace to meet the demands…People who talk about the end of oil and (Guyana possibly being left with stranded oil assets) should look at this,” the Vice President said.

He believes this is one of the key considerations for companies like Chevron hence it has made a genius play for Hess, giving it access to the high return, low-cost barrels within the Stabroek Block. In that deepwater concession, Exxon has already unlocked 11 billion barrels of oil equivalent resources. It was also given the green light to execute a 35 well programme in the block in search of more oil. Jagdeo said government is pleased that Chevron, by way of its takeover of Hess, will join Exxon which operates the Stabroek Block. He said Guyana will then be host to the two biggest oil conglomerates in the USA, both of which have deep pockets.

“…they have deep pockets and they can fund the investment programmes necessary to move us to peak production at the earliest point in time. Other smaller companies that are investing in other parts of the world and other countries have to go and raise capital and the market is still not that friendly for raising that,” the Vice President said. He further noted that government has examined Chevron carefully and believe that it will be a good partner for Guyana.

Chief Executive Officer and Chairman of Hess Corporation, John Hess shared similar sentiments during a call with shareholders on Monday. As he shared details about the merger with Chevron, he told his investors that the Guyana Government would be very supportive of the deal. He said, “Guyana will be very supportive of Chevron stepping into our shoes and the joint venture. It’ll mean that two of the largest U.S. oil companies who are multinational companies, and investors will be in the country.

“It will strengthen the confidence in the country for foreign investment. It will strengthen the joint venture (in the Stabroek Block) technically as well. We’re very confident that the country of Guyana will be supportive of this transaction.”

Chevron had said on Monday that it is buying out all the outstanding shares at Hess Corporation for US$53 billion, or US$171 per share. During a call with its shareholders, Chevron dubbed the Stabroek Block as “an extraordinary asset with industry leading cash margins and low carbon intensity that is expected to deliver production growth into the next decade.”

As a result of this deal, Chevron said it intends to recommend an increase to its first quarter dividend per share of 8% to US$1.63, which will be subject to the approval of the Chevron Board of Directors. It also plans to increase share repurchases by US$2.5 billion to the top end of its guidance range of US$20 billion per year in a continued upside oil price scenario. In the Stabroek Block which stretches a massive 6.6 million acres, ExxonMobil is the operator with a 45 percent working interest while China National Offshore Oil Corporation (CNOOC) holds 25 percent. Since oil production commenced in December 2019 at the Stabroek Block’s Liza Phase One Project, Exxon successfully started another, the Liza Phase Two, in February 2022. Both projects are producing about 400,000 barrels of oil per day. Exxon and partners are also targeting over 1.2 million barrels of oil by 2027, making Guyana’s Stabroek Block, one of the world’s fastest-ever oil development hotspots.

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• Chevron Corporation, Dr. Bharrat Jagdeo, Hess Corporation, Kiana Wilburg, multinational, Vice President

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