Exxon Retreats From Confrontation With Venezuelan Navy

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Exxon Mobil Corp. (NYSE: XOM) has reported discoveries totaling billions of barrels of oil offshore of Guyana. Or offshore of Venezuela, depending on whom you ask.

Last Saturday, the Venezuelan navy intercepted and forced an oil research vessel to turn around claiming that the ship was in Venezuelan waters. The vessel, the Ramform Tethys belongs to a Norwegian firm and was conducting a seismic survey for Exxon at the time the ship was forced to turn around.

According to Guyana, the vessel was intercepted in its “exclusive economic zone and continental shelf” approximately 140 kilometers “from the nearest point to the provisional equidistant line with Venezuela.”

An Exxon spokesperson told Reuters that the company will halt seismic exploration in the western portion of the Stabroek block “until they can be safely continued.” The spokesperson noted that the vessel was operating in Guyana’s exclusive economic zone.

In a statement issued Saturday, the Guyanese government said:

The Government of Guyana rejects this illegal, aggressive and hostile act perpetrated by the Government of the Bolivarian Republic of Venezuela which once again demonstrates the real threat to Guyana’s economic development by its western neighbor; an act that violates the sovereignty and territorial integrity of our country.

Venezuela gave up its claim on the waters offshore Guyana’s Essequibo region more than a hundred years ago. Venezuela changed its mind recently and the issue has been referred to the United Nations and the International Court of Justice. Guyana has supported these moves; Venezuela has not.

Billions of dollars are at stake. Exxon has announced an estimate of more than 5 billion barrels of crude oil lying under thousands of feet of water and more thousands of feet of ocean floor in the region now under dispute. Another 17 drilling prospects in the Stabroek block could raise that total substantially.

President Trump has been a vocal critic of Venezuelan President Nicolas Maduro and both China and Russia have supported the Venezuelan government, China with money and Russia with the announcement that it will build a military base in the country.

Exxon owns a 45% interest in the Stabroek block comprising some 6.6 million acres in the waters offshore of Guyana. The company’s Guyanese affiliate is the operator of the block. Hess Corp. owns a 30% stake in the block and China’s CNOOC owns the remaining 25%.

Exxon shares traded down about 3.5% Monday at $65.75 after posting a new 52-week low of $65.44 earlier in the day. The stock’s 52-week high is $89.30.

West Texas Intermediate (WTI) crude oil for February delivery traded down about 2.9% at $44.28 just before noon Monday. Brent crude for February delivery traded down about 2.6% at $52.43. Since early October, the front-month contract for Brent crude has dropped by a third.

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