Chevron warns acquisition of Hess Corp may be in jeopardy over key asset in Guyana

Chevron has warned that its pending US$53-billion acquisition of Hess may be in jeopardy because it will require the approval of Exxon Mobil Corp and a Chinese national oil company, which both hold rights to development of an oilfield off the coast of the South American nation Guyana.

The disclosure in a filing with the US Securities and Exchange Commission raised investor qualms, depressing shares of both Chevron and Hess on Tuesday morning before rebounding.

Chevron’s acquisition of Hess would add this major oilfield in Guyana, as well as shale properties in the Bakken Formation in North Dakota.

Guyana is a country of 791,000 people that is poised to become the world’s fourth-largest offshore oil producer, placing it ahead of Qatar, the United States, Mexico and Norway. It has become a major producer in recent years, with oil giants, including Hess, Exxon Mobil and China National Offshore Oil Company, better known as CNOOC, squaring off in a heated competition for highly lucrative oilfields in northern South America.

Chevron said it’s been engaged in discussion with Exxon and CNOOC. Both companies hold rights of first refusal for decisions regarding the oilfield in question, known as the Stabroek Block. Exxon Mobil operates the Stabroek Block and holds 45 per cent interest, while Hess holds 30 per cent interest, and CNOOC holds the remaining 25 per cent interest. Production capacity at the field is expected to reach more than 1.2 million barrels per day by the end of 2027, Exxon said in November.

If those discussions and subsequent arbitration fail to set aside those first refusal rights, Chevron said, “the merger would not close”.