Chevron CVX-N was surprised when Exxon Mobil XOM-N filed for arbitration over Chevron’s plans to buy Hess’s Guyana oil field stake, Chevron CEO Michael Wirth said on Tuesday.
The dispute threatens to derail Chevron’s $53 billion takeover of Hess. The 30% stake in the prolific Exxon-operated Stabroek oil field in Guyana is Hess’s most valuable asset.
Exxon says it has the right of first refusal for Hess’s stake. Chevron had been in talks with Exxon over the matter, Wirth said.
“We were surprised when they, a couple of weeks ago, abruptly ended those discussions and publicly announced … they had filed for arbitration,” Wirth said at the CERAWeek energy conference in Houston.
On Monday, Exxon CEO Darren Woods told Reuters the company filed for arbitration because discussions were not happening with Chevron and Hess around the right of first refusal provision.
“Those discussions needed to happen and hadn’t been happening,” Woods said.
Woods said Exxon wanted to have its right of first refusal recognized before it could decide on its strategy for the Stabroek block. An Exxon executive has said the arbitration could take five to six months.
Chevron had done extensive due diligence on the operating agreement between Exxon and Hess in Guyana and has extensive experience in those types of agreement around the world, Wirth said.
Chevron is looking forward to affirming its understanding of the contract in the arbitration, he added.
Meanwhile, Wirth said that Chevron had not executed its expansion project in Kazakhstan “as well as we expected.”
The project has taken longer and cost more than planned, he said.
The expansion will increase the Chevron-led consortium’s output at the Tengiz field to over 1 million barrels per day from around 650,000 bpd now, he added, and would start up this year and reach full capacity next year.
Chevron was on track to hit its oil output target of 1 million bpd in the Permian, the largest U.S. oil field, by 2025, he said.