Comments

You have commented 339 times on Rantburg.

Your Name

Your e-mail (optional)

Website (optional)

	My Original Nic Pic-a-Nic Sorry. Comments have been closed on this article.
Foto

Submit your comments on this article

Economy

ExxonMobil and its fight to pursue massive oil find in Guyana

2024-03-19

[WND] Exxon Mobil Corp. went to court last week to establish its basic right to review, and ultimately approve or preempt, Chevron Corp.’s planned megadeal to acquire Hess Corp., an independent American energy company that owns a minority stake in Guyana’s enormous offshore oilfield, the Stabroek Block.

Bar none the most exciting and prolific oil find of the past decade, it’s understandable that Chevron would want to get in on the Stabroek action. But as 45% owner and operator of the block, it’s also understandable that Exxon would expect to have the first right of refusal, which is lawyer speak for the opportunity to match Chevron’s offer for Hess’s 30% stake.

Contrary to some critics’ claims, Exxon’s is neither being aggressive nor a bully in seeking to establish its contractual right of first refusal, or preemption rights. Rather, it’s abiding by the terms and obligations of the Stabroek Joint Operating Agreement (JOA), first signed by Exxon and its then-partner, Shell, in 2008—the year exploratory drilling began. At that time, Exxon and Shell agreed to split the risks and costs equally, with each holding a 50% stake.

Get the hottest, most important news stories on the Internet — delivered FREE to your inbox as soon as they break! Take just 30 seconds and sign up for WND's Email News Alerts!

But after years spent drilling into empty wells, Shell decided to cut its loses, exiting Guyana in 2014 by selling its position to Hess for the bargain price of US$1 per share. Exxon, however, continued to believe in Guyana and welcomed two new partners to the Stabroek consortium that same year: Hess and CNNOC, a Chinese oil company. Some 30 other companies were also invited to join, but none were interested, believing—like Shell—that exploration was too costly, and chances of success too slim.

In defiance of these naysayers, Exxon willfully assumed the lion’s share of the risk with a 45% majority stake, followed by Hess with 30%, and CNOOC with 25%. Months and millions later, in May 2015, Exxon was vindicated with a significant first discovery.

Since then, the Exxon-led consortium has made more than 30 additional discoveries, with Exxon alone investing some $20 billion to develop the Stabroek, now estimated to hold over 11.2 billion barrels of oil-equivalent, including an estimated 17 trillion cubic feet of associated natural gas reserves. That’s more than 110,000 times the total daily oil consumption of the entire world, and more than half the annual natural-gas consumption of the U.S., the world’s largest producer and consumer of natural gas.

Before this abundance was realized, Exxon, Hess, and CNOOC signed a JOA that clearly stipulates the right of all existing partners to participate in any deal that would result in an ownership change, making Exxon undeniably justified in seeking to establish its contractual right of first refusal of the Chevron-Hess deal.

Indeed, it has a fiduciary duty to do so—not only to shareholders, but to the government of Guyana, for whom Exxon last year generated $1.4 billion in revenue by producing 645,000 barrels per day (bpd), making Guyana the world’s no.1 fastest-growing economy with the highest real GDP growth rate on record. And as Exxon ramps up production to reach 1.2 million bpd over the next three years, this growth will only accelerate, with the Guyanese government expected to generate $10 million in annual oil revenues by 2027, and as much as $157 billion by 2040.

Guyana’s people are also benefiting, with per capita GDP rising from $6,477 in 2019 (the year Exxon began production) to $20,560 in 2023. By 2027, per capita GPD is expected to reach $35,900, again thanks to Exxon’s planned production ramp-up. As a result, Guyana has experienced a substantial decline in poverty, with fewer than one-in-every-three Guyanese estimated to be living below the $5.50-per-day poverty line, compared to more than two in every three in 2006.

Having assumed the lion’s share of the risk at a time when few believed in Guyana’s potential, Exxon has both a right and an obligation to shareholders to ensure it realizes the value created in the Stabroek. Just as important, it also has a duty to the government and people of Guyana to ensure it can continue supporting the country’s socioeconomic development—and to do that, the terms of the JOA must be respected. In this case, that means respecting Exxon’s right to participate in and perhaps preempt Chevron’s takeover of Hess’s 30% stake.

Posted by:Besoeker

00:00