FTC accuses Hess boss of ‘colluding’ with OPEC to keep oil prices high

Oct 07, 2024 News

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Kaieteur News – The United States Federal Trade Commission (FTC) has accused John Hess, the Chief Executive Officer (CEO) of Hess Corporation of colluding with past and current members of the Organization of Petroleum Exporting Countries (OPEC) and others, to keep oil prices high.

As such, a condition of the FTC allowing the US$53 billion acquisition of Hess by Chevron to move forward is that John Hess is barred from being appointed to the Board of Directors. The FTC’s complaint alleges that Mr. Hess communicated publicly and privately with the past and current Secretaries General of the OPEC and an official from Saudi Arabia. It is said that Hess stressed the importance of oil market stability and inventory management and encouraged the officials to take actions on the issues. It is said that Hess had some conversations with them at different events.

“Mr. Hess further encouraged his OPEC competitors to stabilize production and draw down inventories, the complaint alleges. As Mr. Hess has noted publicly, there is a direct correlation between inventory levels and oil prices. Reductions in crude oil exploration and production generally lead to higher oil prices and higher prices for products derived from oil, including transportation fuels such as gasoline, diesel, and jet fuel, and heating oil,” the FTC said.

Moreover, Henry Liu, Director of the FTC’s Bureau of Competition said, “Mr. Hess’s communications with competitors about global oil output and other dimensions of crude oil market competition disqualify him from serving on Chevron’s Board of Directors.”

Liu added, “The FTC will use all its available enforcement tools to protect competition in this vital market and help ensure American consumers benefit from lower prices at the pump.”

The FTC’s complaint alleges that, as a Chevron Board member, Mr. Hess would gain a much larger platform to amplify his supportive messaging to OPEC and others about OPEC’s market stability goals, increasing the likelihood that Chevron could align its production with OPEC’s output decisions to maintain higher oil prices.

“The complaint alleges that, given his prior conduct, Mr. Hess’s appointment to Chevron’s Board of Directors would heighten the risk of harm to competition, including meaningfully increasing the risk of industry coordination,” it was stated.

Notably the FTC’s proposed consent order would prohibit Chevron from nominating, designating, or appointing Mr. Hess to the Chevron Board, and from allowing Mr. Hess to serve in an advisory or consulting capacity to, or as a representative of, Chevron or the Chevron Board.

However, it would allow Chevron to consult with Mr. Hess and allow him to serve as an advisor, consultant, or representative of Chevron, solely related to interactions and discussions with: Guyanese government officials about Hess’s oil-related and health ministry-related activities in Guyana, and the Salk Institute’s Harnessing Plants Initiative.

Moreover, in response to the FTC, Hess CEO in a statement said, “We are very pleased that our merger with Chevron has cleared this significant regulatory hurdle.”

He added, “This transaction continues to be an outstanding deal for Hess and Chevron shareholders and will create a premier integrated energy company that is ideally positioned for the energy transition.”

Notably, it was disclosed that to facilitate completion of the merger, Hess and Chevron have agreed that Mr. Hess will not be appointed to the Chevron Board of Directors in order to address a concern raised by the FTC about Mr. Hess’ communications with a limited number of OPEC officials. However, they agreed that Mr. Hess will serve as an advisor and representative for Chevron on government relations and social investments in Guyana as well as on support for the Salk Institute’s Harnessing Plants Initiative.

Notably, Hess Board of Directors believes that the competitive concern raised by the FTC about Mr. Hess’ communications is without merit, and fully supports Mr. Hess in his role as CEO of Hess Corporation. Mr. Hess’ public and private communications with OPEC officials were consistent with his communications with U.S. government officials, the International Energy Agency and global business leaders on what will be needed to ensure an affordable and orderly energy transition.

This publication had reported that the multi-billion takeover of Hess by Chevron was announced in October 2023. Since then, there have been several new developments in relation to Hess’ most valuable asset in Guyana – the Stabroek Block – Hess Guyana holds a 30% interest in the oil block.

The operator of the block, ExxonMobil Guyana Limited (EMGL) and the third partner CNOOC Petroleum Guyana Limited have both moved to arbitration, filing their case at the International Chamber of Commerce in Paris, arguing that it has a right of first refusal over Hess’ stake. Exxon holds a 45% interest in that block, and CNOOC with 25% interest.

Darren Woods, the CEO of Exxon has said that his company is trying to secure preemption rights over Hess Corporation’s Guyana assets (the 30% stake) in its dispute with Chevron. He clarified that Exxon was not trying to buy over Hess Corporation.

For their part, 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.

Notably, a hearing has been set for May 2025 for arbitration related to Chevron’s proposed US$53 billion takeover of Hess.

 

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• Chevron, FTC’s Bureau, John Hess, OPEC, Stabroek Block

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