America’s two largest energy companies, Exxon Mobil and Chevron, are jousting over a prized new source of oil in the waters off Guyana, in Latin America.
The conflict is creating doubts over Chevron’s bid to acquire Hess Corp. for $53 billion, announced in October. Chevron this week warned of the possibility that “the merger would not close” because of the dispute.
At the heart of the deal is Hess’s investment in Guyana, where an Exxon-led group has discovered a massive 11 billion barrels of oil and gas in an area known as the Stabroek block. With just 800,000 people, Guyana, long one of Latin America’s poorest countries, is now being compared to Qatar, the natural gas-rich Persian Gulf emirate.
Exxon has raised concerns over Chevron’s effort to gain entry to this petroleum bonanza through a proposed purchase of Hess’s 30 percent stake in Stabroek. Under the agreements governing the block, Exxon may be entitled to a right of first refusal — known in industry jargon as pre-emption — that partners in the development share over any stake sold. Exxon owns 45 percent of Stabroek and is the operator or manager of the area. The third partner in Stabroek is CNOOC, a large Chinese energy company.
Exxon seems to believe that it should be rewarded for the financial risks it has taken in developing Guyana’s oil resources and the technological contributions it has brought to the country.
“We owe it to our investors and partners to consider our pre-emption rights in place under our Joint Operating Agreement to ensure we preserve our right to realize the significant value we’ve created and are entitled to in the Guyana asset,” Exxon said in a statement.
