ExxonMobil’s priority in winning its arbitration challenge against Chevron and Hess over the prolific Stabroek block offshore Guyana is not whether the case could blow up the proposed $53 million merger between the two US operators, chief executive Darren Woods told analysts Wednesday.
“That’s their construct, not ours,” Woods commented. “Our view is that we have an opportunity. We’ve developed the value of that asset. We have a right to consider the value of that asset in this transaction, and a right to then take an option on it.”
Added Woods: “Why would we give that away?”
Chevron and Hess have acknowledged in federal filings that their marriage may “fail to be completed” if the ExxonMobil-CNOOC International arbitration does not go their way.
ExxonMobil and CNOOC International filed their arbitration challenges months after Chevron and Hess announced their deal. Both companies believe they have a right of first refusal to Hess’ 30% stake in Stabroek, which is a key pillar in the Chevron merger.
One of the first questions that analysts asked Woods was the rationale for the arbitration, which has made headlines for months and has dragged the timeline for Chevron-Hess merger for more than a year than its originally anticipated finish.
Woods maintained that ExxonMobil is “very confident” in its case because it believes it is more familiar with the “intent” of the original contract for Stabroek that it drew up with Shell when the UK supermajor still owned a stake in the field.
ExxonMobil operates Stabroek with a 45% stake. The remaining 25% belongs to CNOOC International.
The ExxonMobil chief said his objective is to “defend what we believe is a fundamental right” to value Hess’ stake in Stabroek and decide whether his company wants to buy the interest.
“So maintaining the integrity of that document and defending that, I think, is critical, not only for this particular asset, but for the precedent that says for everything else that we’re doing. That’s the basis on which we’re approaching this.”
ExxonMobil senior vice president Neil Chapman was even more blunt than Woods. He said the company’s rationale for arbitration is “dead simple”.
“It would be incomprehensible in my mind to just say, ‘We don’t think we want to test it. We don’t know what the value is. We’re not gonna look at it,’” Chapman said. “What we’re saying is we have the rights. We want to test the value.”
‘We’re continuing to explore’
Guyana is the gift that keeps on giving for ExxonMobil and its partners in Stabroek.
Three floating production, storage and offloading vessels are already in operation there, and three others — Yellowtail, Uaru and Whiptail — have already been sanctioned and should be in place by 2027.
Two other FPSO developments, Hammerhead and Longtail, could come online by the end of the decade and push Stabroek’s output to 1.3 million barrels per day by 2030.
Though the project output in the offshore field continues to climb, Chapman noted that “we’re still very early in the development of the Stabroek block”.
“Three boats online, five to come. These eight boats are gonna be deployed across hundreds of square miles. What that means is when you’ve got eight foundational boats, you’ve got lots of opportunities for tiebacks, you’ve got lots of opportunities for infield drilling,” he said.
“Those are the highest return investment you’ll ever make in the upstream (segment) because you’ve got most of the capital already deployed. We’re not even close to doing that. There’s lots of running room. We’re continuing to explore.”
Source: By Robert Stewart from upstreamonline.com