What to Expect From Chevron’s Massive Guyana Investment

Guyana has been the hot new spot for oil exploration in recent years, following several big discoveries. Multiple oil majors are investing in operations in the South American country, as they aim to pump “low-carbon oil” in a bid to continue developing their fossil fuel production with support from governments and consumers. In July, Chevron entered Guyana, alongside Exxon and other oil majors.

In mid-July, the U.S. oil major Chevron announced it had completed the $53-billion acquisition of Hess Corporation following the win of an arbitration case against Exxon over Hess’s Guyana assets. The deal, which would provide Chevron with stakes in the Bakken in North Dakota, as well as a 30 percent stake in Guyana’s Stabroek offshore oil field, had been in the works since 2023.

Exxon operates the Stabroek block and holds a 45 percent stake, with China’s CNOOC holding the remaining 25 percent stake. The takeover was delayed for two years as Exxon and CNOOC claimed they had the right of first refusal for Hess’s stake under the terms of a joint operating agreement (JOA) for the Stabroek block. Hess and Chevron countered by saying the JOA did not apply in the case of a full corporate merger, with the court eventually ruling in favour of Chevron.

Chevron, based in Houston, is the second-largest oil company in the U.S. after ExxonMobil. The acquisition of Hess will make Chevron more competitive both in the U.S. and abroad. Upon the announcement of the takeover and Chevron’s new stake in Guyana, Exxon responded positively, after its initial reluctance to share the Stabroek block with the oil major. “We welcome Chevron to the venture and look forward to continued industry-leading performance and value creation in Guyana for all parties involved,” an Exxon spokesman saidin a statement.

Chevron will now take over Hess’s assets in the U.S. and Guyana. “The combination enhances and extends our growth profile well into the next decade,” Chevron’s CEO Mike Wirth said about the completion of the acquisition.

Until the recent acquisition, it was highly uncertain where Chevron’s domestic oil production was going to come from. The amount Chevron can potentially extract from its oil and gas fields fell to 9.8 billion barrels at the end of last year, the lowest point in at least a decade. Following the acquisition, Chevron’s production volumes are expected to reach around 4.31 million bpd by 2030, compared to 3.3 million bpd in 2024.

As President Donald Trump encourages higher levels of oil and gas output from U.S. companies in the coming years, several oil firms have assessed the potential for expanding operations, both at home and abroad. By solidifying its stake in Guyana, Chevron can now be sure of the future of its oil supply, as it will reap the rewards of the shared production operations of the South American country’s vast untapped reserves.

David Byrns, a portfolio manager at American Century Investments, explained that “[Chevron’s] acquisition plugs a free cash flow hole that Chevron had looming at the end of this decade into the 2030s.” Byrns said that it was previously uncertain how Chevron would maintain free cash flow.

Guyana presents a great new oil perspective from companies looking to tap into untouched reserves, as other oilfields in several parts of the world mature. In recent years, companies operating in Guyana have made several promising discoveries. Exxon began exploratory drilling with CNOOC and Hess around a decade ago, and it now estimates Guyana’s oil reserves to stand at around 11 billion barrels.

Exxon began producing oil from these reserves in 2019 and now has an average output of 650,000 bpd. By 2027, the company expects to achieve an output of 1.3 million bpd, and by 2030, this figure should rise to 1.7 million bpd, which would make the tiny country of Guyana one of the world’s largest oil producers per capita.

Chevron had faced months of challenges up to the acquisition, which resulted in widespread global layoffs. The oil firm has experienced serious safety failings in its Angola operations. It also lost oil exports from Venezuela, as the state-owned company PDVSA suspended most of the loading windows it had assigned to Chevron in April and ordered the return of some oil cargoes bound for the U.S. due to payment uncertainty related to the enforcement of U.S. sanctions. These disruptions have caused Chevron shares to fall by 7.5 percent over the last year.

Chevron’s acquisition of Hess will allow the U.S. oil major to pump oil domestically and abroad for decades to come, should the global demand for fossil fuels remain high enough to warrant it. Its new assets will also help the firm to become more competitive with other oil majors, such as Exxon, after several months of challenges and stock price decline.

By Felicity Bradstock for Oilprice.com