Hess, ExxonMobil and CNOOC merge Stabroek arbitration proceedings

March 29, 2024
At issue are differing interpretations of what a right-of-first-refusal provision means given Chevron’s plans to acquire Hess.

The various legal wranglings over the joint operating agreement governing the Stabroek block offshore Guyana—a dispute that could unravel Chevron Corp.’s planned $53 billion purchase of Hess Corp.—have been merged into a single arbitration proceeding.

Chevron last fall announced plans to buy Hess, which owns a 30% non-operated interest in the Stabroek block spanning more than 6.6 million acres and having estimated reserves of about 11 billion bbl. ExxonMobil Corp. operates the block and owns 45% of the consortium that is developing it, with China National Offshore Oil Corp. owning the remaining 25%.

At issue between the parties is the right of first refusal in their JOA: ExxonMobil and CNOOC say that clause in the agreement gives them the right to acquire Hess’ interest in the Stabroek block at the value assigned to it in Chevron’s acquisition plan. Hess and Chevron believe that the right of first refusal does not apply to their plans to join forces both “due to the structure of the merger and the language of the Stabroek [right-of-first-refusal] provisions.”

Lawyers for Exxon on Mar. 6 asked the International Chamber of Commerce to appoint an arbitrator to rule on the disagreement (OGJ Online, March 6, 2024). Five days later, Hess launched its own arbitration process and CNOOC followed suit 4 days after that. The parties subsequently jointly applied to consolidate the three cases, which the chamber did Mar. 26.

The process isn’t likely to move quickly. ExxonMobil executive Neil Chapman said in early March the hearings and decision could take 6 months.

Chevron and Hess executives have said that a ruling giving Chevron and CNOOC acquisition rights would not let Chevron and Hess meet the closing conditions of their merger agreement and leave Hess an independent company.

“Based on the express terms of the Stabroek JOA, Chevron and Hess do not believe there is any material likelihood that the circumstances described […] will occur,” Chevron officials said in a US Securities and Exchange Commission filing Mar. 28.

For his part, ExxonMobil chief executive officer Darren Woods said in mid-March that his team is not seeking to buy all of Hess out of from under Chevron’s nose. Woods did tell Reuters that acquiring Hess’ 30% stake in Stabroek is an option his team might pursue if an arbitrator confirms its first-refusal argument.