A row over Exxon's (NYSE:XOM, ETR:XONA) giant oil discoveries offshore Guyana threatens to scupper Chevron's (NYSE:CVX, ETR:CHV) takeover of Hess Corp (NYSE:HES), according to new reports.
Hess is the minority partner in the Exxon-operated Stabroek block, holding 30% of the ‘project’ which spans an equivalent size to 1,150 blocks in the Gulf of Mexico and currently yields around 600,000 barrels of oil production per day.
Exxon meanwhile leads with a 45% stake in the venture that is targeting some 1.2 million barrels a day of output by 2027, as it brings on the first six of ten planned floating production facilities.
Stabroek was a key attraction for Chevron as it agreed its $53 billion takeover of Hess last year, though evidently, Exxon is less keen on sharing the asset with its rival supermajor.
Exxon claims it holds a pre-emption right that should give it first refusal to buy out Hess, ahead of Chevron, and, according to reported comments by a senior executive at a Morgan Stanley (NYSE:MS) conference this week, Exxon has filed for arbitration with the International Chamber of Commerce.
Chevron meanwhile is ‘confident in its position’, according to comments published by Barons, responding to the reports.
Not only is Stabroek vast is geography, it is also vast in geology with Exxon and Hess making close to 20 major oil discoveries in recent years. Estimates of the total oil endowment run into double-digit ‘multi-billion barrels’ – with estimates above 11 billion with lots left to assess.
Guyana’s ‘oil rush’ frontier
Stabroek put the Guyana oil on the map and the industry has subsequently flocked to capture the rest of the surrounding exploration acreage off South America’s northern coast – Occidental (via Anadarko), Repsol, TotalEnergies are among those that have invested in the frontier.
Exxon, Hess and the likes of Shell, Apache, and Petronas have similarly staked exploration areas over the maritime border in the waters of Suriname.
Still up for grabs – or, indeed, newly up for grabs – is acreage now held exclusively by small-cap firm Eco (Atlantic) Oil & Gas Ltd (AIM:ECO, TSX-V:EOG), a London AIM market explorer which is currently seeking new partners for its Orinduik asset, which is located immediately next door to Stabroek.
Eco this week inked an important new partnership deal with TotalEnergies and Qatar Energy for a project in the Orange basin, another South Atlantic exploration ‘hotspot’, to advance to drill a new well.
In Guyana, at Orinduik, Eco last year took full control and ownership of the asset following the exit of Tullow Oil, TotalEnergies and QatarEnergy each exited the project – each for their own ‘strategic reasons’.
Exploration work in the past at Orinduik sought to test targets in alternate geologies than those discovered over in Stabroek, but, going forward, Eco seeks to drill a well in the “Cretaceous interval on the Guyana oil fairway” (i.e. the same type of prospects as Exxon’s in Stabroek). It hopes to secure new partners in time to plan and execute a well in the next twelve to eighteen months.