“Govt has little say” – VP Jagdeo on in Chevron-Hess deal

With US$53 billion merger deal between Hess Corp. and Chevron Corp. under threat after ExxonMobil Corp filed arbitration to claim preemptive rights in the Stabroek Block operations offshore Guyana, the Guyanese Government has stated it that has little to do with this matter.
Back in October 2023, it was announced that Hess Corp. has entered into an agreement to merge with Chevron – a deal that was expected to wrap up in the first half of this year. This deal would allow Chevron to buy into Hess 30 per cent stake in the oil-rich Stabroek Block, which is operated by ExxonMobil, which has the majority interest of 45 per cent while CNOOC holds the remaining 25 per cent stake.
On Wednesday, ExxonMobil announced that it has filed a case in the International Chamber of Commerce to assert its right of first refusal over Hess’ interest offshore Guyana.
During a press conference on Thursday, Guyana’s Vice President Dr Bharrat Jagdeo was asked about the implications this could have for the country.
He explained that based on advice that government has received, Guyana’s laws do not necessitate the state’s approval for the merger transaction.
“Under our laws, we are not required to approve the transaction and that’s the legal opinion we got. So, really, it is a dispute over the joint operating agreement that the three parties signed. Exxon now has gone to arbitration to assert, what it claims as, its pre-emption rights… We’re not a party to that matter,” Jagdeo stated.
Last year when merger deal was announced, VP Jagdeo had welcomed the news stating that Chevron’s “deep pockets” would be good for Guyana – a position he reiterated on Thursday.
“Chevron would’ve been a welcomed addition to the number of players that we have here because it’s a big company and often it is good to have a number of companies here. But we have very little say over that. It’s Hess who is selling their shares, they’re selling their company out and we have little say. And it’s not the company in Guyana, it’s the global company, he’s selling,” the Vice President noted.
While the Chevron/Hess merger was expected to be closed in the first half of this year, this will now be delayed in light of Exxon’s arbitration.
However, both Hess Corp and Chevron are confident of the US$53 billion deal going through.
An article published by Bloomberg on Thursday indicated that while the deal may be delayed, Hess Corp. is confident its arguments would prevail in the arbitration case filed by Exxon.
In an email to employees on Thursday, Hess said “We disagree with ExxonMobil’s interpretation of the agreement and are confident that our position will prevail in arbitration… There is no possible scenario in which Exxon or CNOOC could acquire Hess’ interest in Guyana as a result of the Chevron-Hess transaction.”
According to Bloomberg, this disclosure marks the first time either Hess or Chevron have said Exxon’s push to safeguard its preemption rights in Guyana could delay their merger, initially expected to close by the second half of this year. It’s also the first time either company has been so explicit about their disagreement over how Exxon is interpreting its joint agreement with Hess and Chinese oil giant Cnooc Ltd. to produce oil off the coast of the South American nation, according to the article.
Arbitration of this nature typically takes “five to six months,” Exxon’s senior vice president Neil Chapman said at a Morgan Stanley conference on Wednesday.
Chapman had noted, “We’re absolutely confident that within this contract, we have pre-emption rights, and we have filed for arbitration to make sure that we can secure those pre-emption rights… The pre-emption rights are to give us the opportunity to look at the value, which we can then match should we choose to do so.”
According to Bloomberg, if Exxon succeeds in blocking the takeover, Hess would be required to pay Chevron a $1.7 billion break-up fee. However, both Hess and Chevron have declared their intention to seeing the deal through.
On Wednesday, Chevron said, “We remain fully committed to the transaction, and are confident in our position. We look forward to closing the transaction on the terms we’ve agreed.”
In its email to employers on Thursday, Hess added “We remain fully committed to the transaction and look forward to closing.”
Hess said it will continue to work with the US Federal Trade Commission as it reviews Chevron’s proposed takeover, according to the article.