Chevron-Hess merger clears FTC hurdle amid arbitration challenge

The U.S. Federal Trade Commission (FTC) has granted conditional clearance for Chevron Corporation’s $53 billion acquisition of Hess Corporation, resolving antitrust concerns. This regulatory milestone allows the merger to advance but imposes significant limitations on Hess CEO John Hess’s involvement in the combined entity.

In a 3-2 vote following a public comment period, the FTC approved a final consent order that prohibits Chevron from appointing John Hess to its board of directors. The agency cited concerns over Hess’s past interactions with the Organization of the Petroleum Exporting Countries (OPEC) during production curtailment negotiations as a factor in its decision.

Beyond barring Hess from a directorial position, the order restricts his advisory and consultancy roles with Chevron, with two key exceptions. Hess may contribute to ongoing projects in Guyana, particularly those related to oil development and health ministry activities, and represent Chevron in its support for the Salk Institute’s Harnessing Plants Initiative.

How Does Arbitration Impact Chevron’s Plans for Guyana?

While Chevron has cleared the FTC’s antitrust review, the merger faces a critical challenge from Exxon Mobil and its partner, China National Offshore Oil Corporation (CNOOC). Both companies have initiated arbitration, asserting a contractual right of first refusal over Hess’s 30% stake in the Stabroek Block offshore Guyana.

This oil-rich field, with recoverable resources estimated at over 11 billion barrels of oil equivalent, represents a cornerstone of Chevron’s strategic ambitions. Exxon Mobil, which leads the consortium with a 45% stake, and CNOOC, holding a 25% stake, argue that Hess’s share should have been offered to them before the Chevron deal.

The arbitration proceedings are set for May 2025, with a decision expected by late summer. If the panel rules in favor of Exxon and CNOOC, Chevron’s acquisition of the Stabroek stake could be jeopardized, complicating its plans to capitalize on one of the world’s most prolific offshore oil regions.

What Does the Chevron-Hess Merger Mean for the Oil and Gas Sector?

Should the merger proceed as planned, Chevron stands to significantly enhance its global asset portfolio. Beyond Guyana, Hess’s assets include:

• North Dakota’s Bakken Shale Play: Chevron will add 465,000 net acres of long-duration inventory, bolstering its U.S. shale operations.
• Hess Midstream Assets: The merger includes integrated infrastructure to support Chevron’s oil and gas production.
• Southeast Asia Operations: Hess’s natural gas business in the region provides a steady cash flow.
• Gulf of Mexico Holdings: Complementary assets in this energy-rich area expand Chevron’s footprint.

The Stabroek Block, however, remains the centerpiece of the deal. Exxon’s consortium in Guyana has already achieved notable milestones, producing 500 million barrels of oil since 2019. Production capacity is expected to exceed 1.3 million barrels per day by 2027, positioning Guyana as a critical player in global energy markets.

Chevron’s acquisition will also increase its leverage in sustainable energy projects. With Hess’s involvement in the Salk Institute’s initiatives, the merger hints at a broader focus on environmental responsibility alongside aggressive expansion.

What Are the Next Steps for Chevron and Hess?

Both Chevron and Hess are optimistic about completing the transaction despite the pending arbitration. The companies anticipate resolving the Exxon-CNOOC dispute by late 2025. Chevron’s CEO, Michael Wirth, has expressed confidence in the deal’s long-term value, emphasizing the strategic fit of Hess’s assets.

For now, industry stakeholders are closely monitoring developments. The FTC’s approval has been seen as a pivotal regulatory step, signaling the Biden administration’s willingness to balance antitrust enforcement with facilitating major energy-sector deals. However, the arbitration outcome will ultimately determine whether Chevron can fully realize its ambitions in Guyana.

This merger, emblematic of the oil and gas industry’s consolidation trends, has already reshaped market dynamics. As Exxon Mobil and Chevron compete for dominance in Guyana, the final arbitration ruling will likely influence broader energy strategies in the coming decade.