Arbitration Between ExxonMobil and Chevron Over Hess Merger to Begin on Monday
Two major American oil companies, ExxonMobil and Hess, will meet in court on Monday to determine whether Chevron’s planned $53 billion acquisition of Hess will go forward. The key issue at the heart of the dispute is rights to oil fields in Guyana, considered among the richest in the world, according to Reuters.
Chevron seeks to acquire Hess in order to gain access to the company’s 30 percent stake in a Guyanese oil project. However, Exxon and China’s CNOOC, which are already partnered with Hess in Guyana, claim that under their joint operating agreement, they hold a preemptive right to purchase Hess’s stake should it be offered for sale. Chevron and Hess argue in response that the deal involves the sale of the entire company, not just its Guyanese assets.
The closed-door international arbitration hearing will take place in London. The companies hope for a court decision by the end of September, though similar legal disputes typically last more than two years.
The outcome of the arbitration will determine whether Chevron gains access to this “oil jewel”, or whether one of the largest deals in the industry collapses.
According to the journal Oil and Capital (Neft i Kapital), Guyana’s fields contain more than 11 billion barrels of oil, and the country is rapidly increasing production.
If the court sides with Exxon, Chevron’s acquisition of Hess is likely to fall through. Although Chevron denies that its interest lies solely in Guyanese assets, without Guyana’s oil it loses the opportunity to boost profits.
Nevertheless, Hess shareholders approved the deal last year, and Guyana’s authorities have welcomed the entry of a new player. (Exxon is the operator of Stabroek, the largest producing field, and the Exxon-led consortium continues to receive new licenses.) In essence, the case revolves around a battle over multibillion-dollar profits between two American oil majors.
