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Exxon’s move to Court over Hess deal shocked Chevron
CEO, Chevron Corporation, Mike Wirth (Photo: Bloomberg)
Kaieteur News – ExxonMobil’s move to file for arbitration over the sale of Hess Corporation shocked the Chief Executive Officer (CEO) of Chevron, Michael Wirth.
Reuters reported on Tuesday that Wirth was surprised as the two companies, were in discussion regarding the deal.
The dispute threatens to derail Chevron’s US$53B takeover of Hess. The 30% stake in the prolific Exxon-operated Stabroek oilfield in Guyana is Hess’s most valuable asset.
Exxon says it has preemptive rights, which means the company should have the first option over any sale of shares in the Stabroek Block. Chevron had been in talks with Exxon over the matter, Wirth said.
“We were surprised when they, a couple of weeks ago, abruptly ended those discussions and publicly announced… they had filed for arbitration,” Wirth said at the CERAWeek energy conference, currently being held in Houston.
On Monday, Exxon CEO Darren Woods told Reuters the company filed for arbitration because discussions were not happening with Chevron and Hess around the right of first refusal provision.
“Those discussions needed to happen and hadn’t been happening,” Woods said in a Reuters article.
He said Exxon wanted to have its right of first refusal recognized before it could decide on its strategy for the Stabroek block. An Exxon executive has said the arbitration could take five to six months.
Meanwhile, Wirth said Chevron had done extensive due diligence on the operating agreement between Exxon and Hess in Guyana and has extensive experience in those types of agreement around the world.
Chevron is looking forward to affirming its understanding of the contract in the arbitration, he added.
The fight over Guyana’s Stabroek Block resources finds its genesis in the lopsided oil deal signed by the APNU+AFC Coalition administration back in 2016. This deal extends favourable terms to the oil companies, providing unlimited tax waivers, uncapped interest rates and perhaps the lowest royalty rates known to the industry, at a meager two percent.
More than 11 billion barrels of oil have been discovered in the Stabroek Block since 2015. Currently, more than 600,000 barrels per day (bpd) is being produced in the resource-rich block, from three projects. So far, government has sanctioned five projects for the operator; a sixth is still pending approval. Exxon plans to ramp up daily production to 1.2 million bpd by 2027. This will not only drive up the country’s oil output but increase profits from the sector.
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