Top U.S. oil producer Exxon Mobil and Hess will meet face-to-face on Monday in a court hearing to determine the fate of Chevron’s $53 billion deal to buy Hess and with it a prized stake in Guyana’s prolific oilfields. The planned acquisition, announced in October 2023, is one of the oil industry’s biggest deals in years. It is key to Chevron CEO Mike Wirth’s strategy of improving the oil company’s performance. Exxon and China’s CNOOC, Hess’ partners in Guyana, filed arbitration disputes early last year, which have delayed the deal’s closing and caused Chevron to miss out on increased output and revenue.
Hess’ most attractive asset is its 30% stake in the Stabroek Block off the coast of Guyana, operated by Exxon. Guyana is one of the world’s fastest-growing oil producers and the Stabroek Block is estimated to hold more than 11 billion barrels of oil equivalent.
Exxon and CNOOC claim that they have a contractual right of first refusal to purchase Hess’ stake in the Guyana field.
Chevron and Hess argue the clause does not apply to the sale of the whole company. If they lose the arbitration and are unable to agree on an acceptable resolution with Exxon and CNOOC, the acquisition would fail, according to the terms of the deal. A three-member arbitration tribunal under the International Chamber of Commerce will analyze the dispute in a confidential hearing that starts on Monday in London.
The joint operating agreement in the Stabroek Block between Hess, Exxon and CNOOC is governed by UK law, according to a source familiar with the terms.
By the time the hearing kicks off, Hess, Exxon and CNOOC should have already submitted in writing the majority of the testimony that will be considered by the tribunal, according to four international arbitration attorneys who are familiar with the ICC’s procedures. A spokesperson for Hess pointed to a previous filing that said the company expects a decision after the hearing in the third quarter, while an Exxon spokesperson referred back to previous public comments about the case. Chevron and CNOOC did not respond to requests for comment.
Prior to the hearing, the companies may submit documents and written statements from witnesses or experts they have called on to support their claims in the dispute.
This phase is typically the longest portion of arbitration proceedings, often taking a year, said William Kirtley, managing partner at Aceris Law, a boutique international arbitration law firm.
The average ICC arbitration case takes over two years to reach a resolution from the time proceedings are initiated, according to the court’s annual report.
Hess, Chevron and Exxon have said they expect a resolution in their dispute by the third quarter of this year, which would be about 18 months after Exxon and CNOOC initiated arbitration proceedings.
“This is relatively fast for an ICC arbitration, especially when considering the size of the dispute,” Kirtley said.
“It suggests that neither party is engaging in delaying tactics to increase the duration of the case.”
WHAT TO EXPECT DURING THE HEARING
On Monday, each party will begin with opening statements before the arbitration tribunal.
Witnesses or experts will be cross-examined, having already submitted direct testimony to the tribunal prior to the hearing.
The arbitrators will interrogate the claims of each side of the dispute and may also ask questions of the witnesses and experts.
Hearings involving large companies or disputes are typically scheduled over the course of five days, three of the attorneys said.
Hess, Exxon and CNOOC may elect to give oral closing statements at the end of the hearing, submit a written closing statement, or both.
The arbitrators may provide a list of key points or remaining questions for the parties to address in their closing statements, two of the attorneys said.
WAITING GAME
The tribunal will formally close the hearing, after which Hess, Exxon and CNOOC will not be allowed to submit further arguments unless authorized by the arbitrators.
Two of the three arbitrators must agree on the final decision, one of the lawyers said.
While the ICC’s rules of arbitration state that the tribunal must render a decision within six months, the four attorneys said the waiting game can vary greatly and the timeline may be extended in some cases.
The tribunal will send its draft decision to the ICC, which will review and approve the award before it is delivered to the parties.
Under the English Arbitration Act of 1996, parties may challenge an arbitral decision on limited grounds, such as serious irregularities, including violations of due process. While parties frequently attempt to set aside awards, such challenges are rarely successful, Kirtley said.
(Reporting by Sheila Dang in Houston; Editing by Simon Webb and Matthew Lewis)