Arbitrator rules in favor of Chevron, Hess in Guyana dispute with ExxonMobil
An arbitrator has ruled that Chevron Corp.’s acquisition of Hess Corp. does not open the door for ExxonMobil Corp. to buy Hess’ non-operated interest in the ExxonMobil-operated Stabroek block offshore Guyana.
The ruling allowed Chevron to close the $53-billion acquisition of Hess, which was announced in the fall of 2023. ExxonMobil chief executive officer Darren Woods and his team had claimed the right to purchase Hess’ 30% stake in the booming Stabroek development via a provision in the companies’ joint operating agreement, which also includes China National Offshore Oil Corp. Chevron and Hess had contended that the right-of-first-refusal provision applies only to direct asset sales, not whole-company acquisitions.
The Stabroek block, located about 120 miles offshore Guyana, spans 6.6 million acres and is estimated to have more than 11 billion barrels of resources. ExxonMobil is the project’s operator and owns 45% of the joint venture; Hess controls 30%, and CNOOC owns the remaining 25%.
ExxonMobil announced its first Guyana oil discovery, in the Liza field, in May 2015 and in 2020 completed its first full year of production there. Gross production from the Stabroek block’s three floating production, storage, and offloading (FPSO) vessels last year grew to an average of 615,000 b/d (topping 650,000 b/d in the fourth quarter) from 390,000 b/d in 2023 and is expected to ramp significantly. The three companies plan to have in place eight FPSOs in the block by the end of 2030, with first oil in the Yellowtail area expected later this year.
ExxonMobil in April received the fourth of those vessels and executives expect that their production capacity in Guyana will grow to 900,000 b/d by yearend. Executives have said that figure should grow to about 1.7 million b/d by 2030 and that the resources discovered to date could support 10 FPSOs over time.
“We disagree with the ICC panel’s interpretation but respect the arbitration and dispute resolution process. As we’ve said before, ExxonMobil and CNOOC are aligned that we had a duty to ensure contract terms are always adhered to and not set a bad precedent for ourselves and industry,” Exxon officials said in a statement. “We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved.”
A legal detour, the road ahead
Word of the arbitrator’s ruling comes nearly 16 months after the parties involved asked to consolidate their cases before the International Chamber of Commerce. In the early-2024 run-up to that development, executives of Chevron and ExxonMobil had been in talks about untangling the right-of-first-refusal knot. But ExxonMobil executives soon after asked for an arbitrator to resolve the dispute.
Hess’ Stabroek stake is considered one of its key assets and accounted for 183,000 of the company’s 476,000 boe/d of production in the first quarter of this year. (The Bakken produced 195,000 boe/d with operations in Malaysia and elsewhere accounting for about 60,000 boe/d.) In terms of capital spending, however, Guyana is Hess’ priority: The company devoted $613 million to the country in the first quarter, up from $447 million in the same period of 2024 and nearly $160 million more than its North Dakota and US offshore assets combined.
The promise of growth in Hess’ stake is a major factor in Chevron’s buyout bid: Several industry analysts have noted that Chevron’s reserves have lately been depleting more quickly than they have been replaced. Independent analyst Paul Sankey said in early July that, had the arbitrator ruled against Chevron, chief executive officer Mike Wirth would need to go hunting for another source of growth—and would likely make a bid to buy Occidental Petroleum Corp.
The statement from Exxon on the arbitrator’s ruling echoes the tone senior vice president Neil Chapman took at the Bernstein 41st Annual Strategic Decisions Conference in May. Addressing the possibility that the arbitration might go against Exxon, Chapman said all that would change in the operations of Stabroek would be getting a new partner.
“Business carries on as normal,” Chapman said of the scenario. “We have partnerships with Chevron all over the world. There’s been no change in terms of how we’re working together at all.”
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.