Hess takeover: Chevron will be good partner for Guyana – VP Jagdeo

– says US$750M carbon credit deal will remain intact

The Guyana Government is confident about working with United States oil major, Chevron Corporation, which is set to take over Hess Corporation in a US$53 billion megadeal.
On Thursday, Vice President Bharrat Jagdeo told a press conference that Chevon will make a good partner for Guyana as the country continues to push an aggressive programme to develop its oil resources.
Earlier this week, it was announced that Hess Corporation has entered into an agreement to merge with Chevron. According to Hess, this transaction is expected to be closed in the first half of 2024.
Hess currently holds a 30 per cent interest in the oil-rich Stabroek Block offshore Guyana, which is operated by another US oil giant, ExxonMobil, with a 45 per cent interest while CNOOC holds the remaining 25 per cent stake.
“We have examined Chevron carefully and we believe Chevron would be a good partner too in Guyana,” VP Jagdeo declared.
He went on to say that the two US oil majors – ExxonMobil and Chevron – will advance production offshore Guyana.
“We’re pleased that there are two major US oil companies here – these are major oil companies. We believe that they (Chevron) have deep pockets and they can fund the investment programmes necessary to move us to peak production at the earliest point in time,” Jagdeo stated.
In addition to its oil investments, Hess also has a historic US$750 million carbon credits deal with the Guyana Government – an agreement which the Vice President said they have been assured will remain intact as the company undergoes the merger with Chevron.
In December 2022, the Guyana Government signed a multi-year agreement for Hess to purchase 30 per cent of the country’s high-quality ART-TREES certified carbon credits.
“My staff has assured me that we’ve reached out [to Hess] and we’ve been assured that our deal is intact,” the VP revealed on Thursday.
According to Jagdeo, the spotlight placed on Guyana during this merger transaction demonstrates the growing importance of the country in the market for the global supply of crude oil.
“The fact that Guyana is an attractive destination for investments is something that we should all be happy about. You have seen globally, a move now by both Exxon and Chevron – the two biggest [oil] companies in the United States of America – to consolidate and also to grow their crude assets. And they’re investing substantial sums of money in acquiring new assets because they are calculating that the global demand for fossil fuel will stay with us for a long time in the future contrary to what we believe or what is being pushed for…,” the Vice President stated.
Only Wednesday, Hess reported a new oil discovery at the Lancetfish-2 well in the Stabroek Block.
Experts have already commented that Chevron’s deep pockets could see more adventurous drilling in the Stabroek Block when it takes over Hess’ Guyana operations.
In its Third Quarter 2023 Report on Friday, Chevron announced its definitive agreement to acquire Hess Corporation, which it said “…is expected to strengthen Chevron’s long-term performance by adding world-class assets and people.”
But the global think tank, Institute for Energy Economics and Financial Analysis (IEEFA) believes that Chevron’s US$53 billion acquisition of Hess is mostly about its Guyana investments.
In a statement on Friday, IEEFA pointed out that “The crown jewel of the deal is a Hess partnership in a massive Guyana offshore oil project. The South American country’s share of offshore profits is sealed with a contract that is one-sided in favour of the companies. During contract negotiations with ExxonMobil, Hess, and the China National Offshore Oil Co (CNOOC), Guyanese officials gave away the store.”
The think tank’s remarks are about the 2016 deal struck by the previous A Partnership for National Unity/Alliance For Change (APNU/AFC) Administration, which has been heavily criticised for its ‘give-away’ nature with low royalty – a meagre two per cent, lack of ring-fencing provisions and cost oil claims that is already seeing Guyana losing billions of dollars.
The current People’s Progressive Party/Civic (PPP/C) Government has already created a new model PSA for future oil contracts that include increased royalty payments, stringent relinquishment clauses, fixed signature bonus, higher profit-sharing, imposition of corporate tax, and lowering of cost recovery ceiling.
Only Thursday, VP Jagdeo announced that the Government has awarded eight oil blocks from its recent auction to six companies.
Among the notable awards was to Sispro Inc, a Guyanese company owned by four women, which has received two oil blocks offshore Guyana – a shallow block (S3) and a deep-water block (D2).
The other deep-water block – D1 – was awarded to Delcorp Inc Guyana which comprises Watad Energy and Communications Limited, and Arabian Drilling Company of Saudi Arabia.
Meanwhile, other shallow blocks were awarded to: Total Energies EP Guyana BV in consortium with Qatar Energy International E&P LLC and Petronas E&P Overseas Ventures SDN BHD (Malaysia), which got Block S4; Liberty Petroleum Corporation of the US and Ghana-based Cybele Energy Limited, which got Block S7, and International Group Investment Inc of Nigeria, which got two Blocks – S5 and S10.
Another shallow block, S8, was also awarded to the Stabroek Block partners – ExxonMobil Guyana Limited, Hess New Ventures Exploration Limited, and CNOOC Petroleum Guyana Limited.
However, ExxonMobil said last week that it would not sign the new PSA in its current form, citing concerns about the stringent terms and conditions. But the Guyana Government has already insisted it would not weaken these new features to suit the US oil major – a position Jagdeo reiterated during Thursday’s press conference. (G-8)