Exxon Taşınabilir Corp. is convinced its interpretation of intent in a Guyanese oil contract signed a decade ago will prevail in a landmark arbitration case against Chevron Corp.
Exxon, which operates and owns 45% of a deep-water oil block in Guyana known as Stabroek, is accusing Chevron of attempting to circumvent a right-of-first-refusal provision through its $53 billion deal to buy Hess Corp. and its 30% stake. Chevron has countered that the provision doesn’t apply to a corporate merger and is “confident” it will win the dispute.
“We certainly have strong feelings that we’re right,” said Exxon Senior Vice President Jack Williams, one of three top executives that oversee company operations with CEO Darren Woods.
Chevron “has strong feelings they’re right as well, so it’ll be an interesting arbitration,” Williams said in an interview at the Leading the Way: Sustainable Aviation Fuel conference in Illinois on March 22. “But we did write it, so we have a view of what was intended.”
In a separate move, Cnooc Ltd., which also owns a stake in the Guyanese trove, confirmed that it also has filed for arbitration against Chevron.
Exxon’s bombshell decision to seek arbitration has thrown a wrench into the biggest deal of Chevron CEO Mike Wirth’s tenure and revealed the extent to which oil executives covet Guyana’s multibillion-barrel crude treasure. Chevron has said it would walk away from the entire Hess deal if the Guyana stake was excluded.
Joint ventures “are very common in our industry, and both Chevron and Hess have a deep understanding of their structures and provisions based on our long history operating within them around the world,” Chevron said in a statement. After thorough due diligence, Chevron found that the provision in question “does not apply to our transaction.”
Exxon is focused on the arbitration case in the International Chamber of Commerce in Paris, Williams said. The process can take months. Chevron has noted that it expects the transaction to close by midyear.
“We have built into that contract a remedy, which is to take it to an arbitration,” Williams said. “So we’re just going to exercise that remedy and let an impartial panel decide who’s right, whose interpretation is right. And so we’ll just let that play out.”(Bloomberg News)