Exxon, Guyana’s oil fields and American commerce

OPINION:

Exxon Mobil indicated last week that it may have a few questions about the proposed merger between Chevron and Hess, especially about how that merger might affect the considerable investment of Exxon shareholders — anticipated to be nearly $20 billion — in Guyana and its massive offshore oil fields, which are estimated to contain more than 11 billion barrels of oil.

For comparative purposes, the world uses about 100 million barrels of crude oil per day.

Exxon, which owns almost half the project, has two other partners: CNOOC and Hess. A significant part of the reason why Chevron wants to buy Hess is to own a portion of the Guyana oil fields. That makes perfect sense. The fields will probably be producing more than 1 million barrels of oil a day within a couple of years.

Other companies — Total, Petronas and Qatar Energy, to name a few — also want to own a piece of the action. For Guyana and its citizens, the development of the oil fields has been a blessing: They have led the world in growth of gross domestic product over the last two years.

It is easy to get lost in the back and forth between well-run and profitable companies. After all, who really cares who owns the oil fields in Guyana?

There are three good reasons to pay attention to this scrum.

First, if the world were really going to wind up running on alternative energy sources anytime soon, these oil fields would not be worth much and no one would be fighting over them. Contests over who owns what assets and who is going to pay for what assets occur only over something that has value. This back and forth tells us that oil fields have lots of value and will continue to do so for years.

Fifty years ago, oil, coal and natural gas made up about 80% of the primary energy used on the planet. In 2022 — the last year for which there are complete records — those same three sources made up about 80% of the primary energy used on this planet. So, you might want to add a grain of salt to whatever you may heard about an energy transition occurring in the next 25 years or so.

Second, this is an example of how and why American companies are the most successful on the planet. Everyone always wants to know why and how Exxon Mobil is so profitable. That’s easy. It is because the company is well managed, pays attention to details and guards its shareholders’ investments carefully.

In this instance, the company wants to make sure that the money, time and innovation it has expended developing these fields will not be compromised by the presence of a competitor. That’s what the shareholders are paying Exxon for — to be good stewards of the shareholders’ hard-earned dollars.

Third, this contest demonstrates the importance of the rule of law and the sanctity of contracts. If you are a big company with lots of projects going on around the globe, things get complicated. The sanctity of contracts — which in this case indicate that Exxon has the right to buy out its partner’s stake before the partner sells it to someone else — is essential. The company has an absolute duty to make sure that it thinks carefully about exercising that right.

Finally, this friendly competition between American companies highlights everything that is great about America commerce. Competence. Innovation. Attention to detail. Responsiveness to shareholders and customers. Commitment to the rule of law. Providing an essential good — in this case, energy — at an affordable price. These are all hallmarks of great American companies and are the reasons why American businesses remain the best on the planet.

• Michael McKenna is a contributing editor at The Washington Times and a co-host of the podcast “The Unregulated.”