Guyana Would Welcome the Entry of Chevron Into Its Oil Industry

Guyana would welcome U.S. firm Chevron joining the major oil projects that its peer Exxon is currently developing offshore the South American country, Guyana’s President Irfaan Ali has told the Financial Times.

Chevron has proposed a multi-billion all-stock transaction to buy U.S. firm Hess, which is a minority partner of Exxon in Guyana’s prolific Stabroek block with a 30% stake.  

While Hess shareholders are set to vote on the proposed deal, Guyana expresses concerns that Exxon raising further its stake in the Stabroek block could raise competition concerns.

Chevron’s proposal to buy Hess is getting increased scrutiny from regulators and politicians, while the supermajor is locked in an arbitration procedure with Exxon regarding Exxon’s right of first refusal for Hess’s stake in the huge oil projects offshore Guyana.  

Exxon claims it has the right of first refusal (ROFR) 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.

Chevron, for its part, 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 an SEC 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.

If Exxon boosts its stake in the Stabroek development, this “can cause concern,” Guyana’s President Ali told FT.

“We are of the view that the partnership works well,” the president said.

Hess shareholders are set to vote on Tuesday on the proposed takeover by Chevron in what is expected to be a vote too close to call, due to several shareholders saying they would abstain, which may not push the vote through the 50% threshold required for approval.  

By Tsvetana Paraskova for Oilprice.com

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