CNOOC joins Exxon in fight over Stabroek Block

Mar 22, 2024 Court Stories, ExxonMobil, Features / Columnists, News, Oil & Gas

CNOOC Limited Chairman, Wang Dongjin

– says company has to safeguard shareholders’ interests

Kaieteur News – ExxonMobil Guyana partner in the Stabroek Block, China’s CNOOC has joined the oil major by moving to arbitration to assert its right over Guyana’s golden oil field, the Stabroek Block.

Last October, it was announced that American oil giant Chevron will be acquiring Hess Corporation (the third-partner in the Stabroek Block) for some US$53 billion. The takeover would give Chevron access to Hess’ most valuable asset in Guyana. However, earlier this month, Exxon the operator of the block filed for arbitration at the International Chamber of Commerce in Paris, arguing that it has a right of first refusal over Hess’ stake. ExxonMobil Guyana holds a 45% interest, while Hess Guyana holds 30% interest and CNOOC Petroleum Guyana Limited with 25% interest.

According to a Bloomberg report, commenting on the dispute with Chevron, CNOOC Board Secretary Xu Yugao, revealed that the company had filed for arbitration on March 15. CNOOC will do whatever it takes to protect the interests of the firm and its shareholders by legal means, he said at a briefing in Hong Kong. “We will uphold the terms of the partners’ agreement to safeguard our shareholders’ interests,” Upstream Online quotes Yugao.

Meanwhile, the company’s Chief Financial Officer Wang Xin told the event that Guyana’s Stabroek block is expected to yield as much as 1.2 million barrels per day by 2027. Moreover, Chief Executive Officer (CEO) of Chevron, Michael Wirth, recently revealed that discussion with Exxon China’s CNOOC abruptly ended over the prolific oil field.

Reuters reported on Tuesday that Wirth was surprised as the two companies, were in discussion regarding the deal. 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. Production from the Stabroek Block developments sits above 600,000 bdp – with Exxon having the Liza 1, Liza 2 and the Payara projects online. The oil companies have embarked on an aggressive drilling campaign in the Stabroek Block targeting three other developments: Yellowtail, Uaru and Whiptail projects. It should be noted that Yellowtail and Uaru have already been approved, while Whiptail is under review awaiting government approval any day now.

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Chevron, CNOOC, Exxon, Hess, Stabroek Block

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