Exxon and CNOOC Team Up To Challenge Chevron’s Guyana Oil Deal

• Exxon and CNOOC have merged their arbitration claims against Chevron's takeover of Hess's stake in the Stabroek oil block.
• Exxon claims it has the right to first refusal to acquire the stake of Hess Corp in the Stabroek block due to pre-emption rights.
• Chevron claims the right of first refusal does not apply to mergers and to this case.

ExxonMobil and China National Offshore Oil Corporation (CNOOC) have merged their arbitration claims against Chevron’s takeover of Hess’s stake in the most prolific oil block offshore Guyana.  

Last autumn Chevron and Hess reached an agreement under which the supermajor would buy Hess Corporation, including its assets in Guyana, where Hess, Exxon, and CNOOC as co-owners have made huge oil discoveries in the Stabroek block.  

However, Exxon claims it has the right to first refusal to acquire the stake of Hess Corp in the Stabroek block, from which Exxon and its current partners pump more than 500,000 barrels per day (bpd) of crude from several projects. 

Earlier this month, Exxon filed for arbitration on the issue of its rights to first refusal to acquire the stake of Hess in an update in what seems like escalating problems between Exxon, the majority stakeholder in the Stabroek Block, and Chevron, which last year struck a deal to acquire Hess Corp. mostly because of its Guyana stake. 

“We’re absolutely confident that within this contract, we have pre-emption rights, and we have filed for arbitration to make sure that we can secure those pre-emption rights,” Exxon senior VP Neil Chapman said at the time. 

A week later, an affiliate of CNOOC commenced parallel arbitration proceedings regarding the applicability of the right of first refusal (ROFR)    for Stabroek to the proposed merger between Chevron and Hess.  

Exxon and CNOOC applied jointly for the arbitration and the authority administering the arbitration consolidated the arbitration proceedings, Chevron said in an SEC filing.

Chevron claims the ROFR doesn’t apply to mergers and to this case. 

“Chevron and Hess believe that ExxonMobil’s and CNOOC’s asserted claims are without merit,” Chevron said in the filing, which cites a letter to shareholders by Hess. 

“If the arbitration does not result in a confirmation that the Stabroek ROFR is inapplicable to the merger, and if Chevron, Hess, Exxon and/or CNOOC do not otherwise agree upon an acceptable resolution, then there would be a failure of a closing condition under the merger agreement, in which case the merger would not close,” the filing says.  

By Tsvetana Paraskova for Oilprice.com

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