The black gold in Guyana

Off the coast of Guyana sits the world’s biggest new oil field in decades. Over nine years, ExxonMobil has clocked up more than 30 discoveries, a mile below the surface and two miles below the sea floor. Not only is it an Elephant, but the Guyanese government is business-friendly, in contrast to so many other countries with valuable natural resources. Still, where there’s an asset there’s a row, and this monster find is no exception.

Exxon’s share is 45 per cent. The Chinese (on the sidelines, for a change) have 25 per cent and Hess 30 per cent. Last week Hess shareholders agreed to a $53bn takeover by Chevron. Ah-ha, said Exxon, that’s a change of control, so we can buy out the 30 per cent. Not at all, comes the response from Chevron. This is why we wanted to buy Hess in the first place, and its stake remains with the company even if it has a new owner.

The lawyers are salivating even more than usual at the prospect of fees for years ahead. Were Exxon to win, it would severely reduce the flexibility (and thus the value) to participants in these types of joint ventures. It’s tempting to suggest that Darren Woods, the pugnacious CEO of Exxon, rather likes these ground-breaking legal actions. At the other end of the scale, Exxon is pursuing one of the irritants that buzz round oil companies nowadays.

A tiny fund management outfit called Arjuna had proposed a motion at Exxon’s last annual meeting demanding that it did more to cut greenhouse gas emissions. After pressure from the company, Arjuna withdrew, but Exxon has brought the legal action anyway, perhaps to swat the mosquito, or perhaps pour encourager les autres. This has caused some fluttering in the fund management dovecotes about suppressing shareholder views, although it didn’t stop a 96 per cent vote last week to re-appoint the Exxon directors.

The British oil twins, Shell and BP, have been much more sensitive on the global warming debate, but the shareholders have paid through poorer performance. Neither Exxon nor Chevron has ever pretended not to be an oil business, first and foremost. Only now that the UK pair are finding that it isn’t easy being green are they clawing back some of the lost ground. Pity neither is in Guyana, though.

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