U.S. Senate Majority leader calls for halt of Chevon and Hess deal

May 14, 2024 ExxonMobil, News, Oil & Gas

U.S. Senate Majority Leader Chuck Schumer

– says if allowed it would be detrimental to consumers

Kaieteur News – The 30 percent stake held in the Stabroek Block by Hess Corporation, is such a lucrative asset, that stakeholders are warning against the merger with Chevron Corporation, since it would put Big Oil companies in a better position to manipulate world market prices.

So much so that on Sunday last, the US Senate Majority Leader Chuck Schumer called on that country’s Federal Trade Commission (FTC) to stop the merger between Chevron and Hess Corp., claiming it would be detrimental to consumers. According to Schumer, “I’m sounding the alarm against yet another proposed Big Oil merger—a US$53B deal between Chevron and Hess; It would give Big Oil more fuel to raise gas prices.”

Earlier this year, Schumer led a group of 22 senators to call on the Federal Trade Commission to look into the tie-up between Exxon and Pioneer Natural Resources, and the Chevron-Hess deal. “Exxon and Chevron’s operations downstream would enable them to redirect Pioneer’s and Hess’s crude supply to themselves, away from (and possibly to the detriment of) their midstream competitors,” the group wrote in a letter to the FTC. “These new market dynamics could result in price hikes for midstream customers, and such added costs are often passed downstream to retail customers, including drivers at gas stations.” Despite the legislators’ push, the FTC approved the merger between Exxon and Pioneer on the condition that former Pioneer CEO Scott Sheffield would not join the board of the combined company following allegations of collusion with OPEC to control oil production to keep prices higher. The Chevron tie-up with Hess already encountered a challenge in the face of Hess’ partner in Guyana, Exxon, which claims it has right of first refusal to Hess’ stake in their joint project there.

Only recently Chief Executive Officer of ExxonMobil Corporation, Darren Woods had said the matter is likely to stretch out until next year, while Hess is optimistic that the deal could be sealed before the end of this year. Exxon and China’s CNOOC have since merged their arbitration claims against Chevron’s planned acquisition of Hess, which would give the U.S oil giant access to Guyana’s Stabroek Block.

Last October, it was announced Chevron will be acquiring Hess for US$53 billion. The takeover would give Chevron access to Hess’ most valuable asset in Guyana. The operator of the Stabroek Block is ExxonMobil Guyana, who holds a 45% interest, while Hess Guyana holds 30% interest and CNOOC Petroleum Guyana Limited with 25% interest.

Exxon was the first to move for arbitration, filing its case at the International Chamber of Commerce in Paris, arguing that it has a right of first refusal over Hess’ stake. CNOOC later followed suit to uphold its right to Hess stake in the block. 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 barrels per day (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. According to Exxon’s Woods, his company is trying to secure preemption rights over Hess Corporation’s Guyana assets in its dispute with Chevron. He clarified that Exxon was not trying to buy over Hess Corporation. “We’re basically standing up for what we believe is a fundamental right,” Woods told Reuters. Hess and Chevron have said they disagree with Exxon’s interpretation of the Joint Operating Agreement (JOA) that governs the Exxon, Hess and CNOOC consortium governing the Stabroek Block.

Chevon, Chuck Schumer, Commission, Hess, U.S. Senate Majority Leader

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