Oil & Gas

Exxon and CNOOC have joined forces in their arbitration claims against Chevron's acquisition of Hess's share in the Stabroek oil block. Exxon asserts its right of first refusal to acquire Hess Corp's stake in the Stabroek block, citing pre-emption rights. However, Chevron argues that the right of first refusal does not apply to mergers, including this case.

ExxonMobil and China National Offshore Oil Corporation (CNOOC) have combined their arbitration claims against Chevron's acquisition of Hess's share in the highly productive offshore oil block in Guyana.

Last autumn, Chevron and Hess agreed to a deal in which Chevron would acquire Hess Corporation, along with its assets in Guyana, where Hess, Exxon, and CNOOC have made significant oil discoveries in the Stabroek block. Nevertheless, Exxon claims it has the right of first refusal to acquire Hess Corp's stake in the Stabroek block, from which Exxon and its partners currently extract over 500,000 barrels per day (bpd) of crude oil from several projects.

Earlier this month, Exxon filed for arbitration regarding its rights of first refusal to acquire Hess's stake, highlighting escalating tensions between Exxon, the primary stakeholder in the Stabroek Block, and Chevron, which struck a deal last year to acquire Hess Corp., primarily due to its stake in Guyana.

"We are absolutely confident that within this contract, we have pre-emption rights, and we have filed for arbitration to ensure that we can secure those pre-emption rights," said Exxon senior VP Neil Chapman.

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

Exxon and CNOOC jointly applied for arbitration, and the arbitration authority consolidated the proceedings, Chevron stated in an SEC filing. Chevron argues that the ROFR does not apply to mergers, including this case.

"Chevron and Hess believe that ExxonMobil's and CNOOC's claims are baseless," Chevron said in the filing, citing a letter to shareholders by Hess.

"If the arbitration does not confirm that the Stabroek ROFR does not apply to the merger, and if Chevron, Hess, Exxon, and/or CNOOC do not agree on an acceptable resolution, then there would be a failure of a closing condition under the merger agreement, in which case the merger would not proceed," the filing concludes.