(The opinions expressed here are those of the author, a

columnist for Reuters.)

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Chevron ( CVX ) wins legal dispute over Hess's stake in Guyana's

Stabroek oil block

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Exxon-Chevron rivalry shapes U.S. energy sector, competing

for

dominance in shale oil

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Oil firms face dwindling reserves, limited options for

building

reserves amid cost control

By Ron Bousso

LONDON, July 18 - The high-stakes clash between Exxon

Mobil ( XOM ) and Chevron ( CVX ) over a prized South American oilfield may be a

sign of what's to come in the oil and gas industry as

competition for a shrinking pool of prime assets heats up.

Chevron ( CVX ) is set to finalize its $53 billion acquisition

of U.S. rival Hess after the companies prevailed in a

legal dispute with Exxon over Hess' 30% stake in

Guyana's fast-growing Stabroek oil block.

The ruling by the Paris-based International Chamber of

Commerce marks a key win for Chevron ( CVX ) CEO Mike Wirth, who

targeted the Hess acquisition to grow the company's production

and keep pace with larger rival Exxon's rapid expansion.

The Hess deal, announced in October 2023, was delayed after

Exxon, which holds a 45% stake in Stabroek, and the field's

third partner CNOOC argued that they had a contractual right of

first refusal to purchase Hess's stake in the block. In fact,

the multi-billion-dollar dispute hinged on the interpretation of

a single sentence in the joint operating agreement.

Exxon's decision to file this arbitration was likely

motivated by a desire to hamper the growth strategy of its key

U.S. rival, the latest move in a decades-long rivalry that has

helped shape the U.S. energy sector.

Stabroek is a highly attractive asset, with 11 billion

barrels of oil reserves and production costs of only around $20

a barrel, among the lowest in the world, according to

consultancy Rystad Energy.

The Guyanese field's production has soared from zero in 2019

to 668,000 barrels per day by the end of March 2025, and is

forecast to nearly double to 1.3 million bpd by the end of 2027.

ARMS RACE

Exxon and Chevron ( CVX ) both trace their roots to Standard Oil,

the conglomerate formed by John D. Rockefeller in 1870 that came

to dominate the American oil industry before being broken up by

the U.S. government in 1911.

In the past decade, the two majors have competed fiercely

for dominance in U.S. shale oil.

Chevron ( CVX ) had an early advantage given its ownership of large

swathes of land in the Permian basin, the shale heartland.

But Exxon regained ground in 2010 with its $41 billion

acquisition of natural gas producer XTO. It then cemented its

position as the largest U.S. producer in October 2023 with its

acquisition of U.S. shale producer Pioneer Natural Resources for

$60 billion.

Chevron ( CVX ) responded quickly, however, announcing that it had

agreed to acquire Hess only 12 days after Exxon's Pioneer deal.

The Hess deal should help Chevron ( CVX ) keep pace with Exxon

moving forward. Chevron's ( CVX ) production is now expected to exceed 4

million bpd by 2030 from 3.4 million bpd in the first quarter of

2025. By contrast, Exxon expects its output to grow from 4.5

million bpd in the first quarter to 5.4 million bpd by the end

of the decade.

DWINDLING RESERVES

Oil and gas companies are facing a future with limited

options for building reserves as the unexplored frontier shrinks

and shareholders push for cost control.

These firms replenish their reserves not only to grow output

but also to offset existing fields' natural decline.

Depletion has been a major problem for Chevron ( CVX ), whose

reserve replacement ratio slid to negative 4% last year, with

reserves falling to their lowest point in at least a decade at

9.8 billion barrels, according to LSEG data. That's the

equivalent to 8 years of production, down from 10 years in 2023,

and compared with Exxon's 12 years in 2024.

Reserves can be increased either through exploration, a

high-risk, high-reward activity, or by acquiring assets and

companies.

Energy giants have invested billions in exploration over the

decades, which has led to the discovery of resources in new

basins such as the North Sea, Angola, Brazil and Indonesia. But

this activity has slowed in recent years as companies have

sought to cut spending to appease shareholders.

Moreover, there are fewer accessible fields to tap. Although

the world holds vast oil and gas reserves, sufficient to supply

around 50 years of current oil consumption, not all resources

are created equal.

First, many resources are simply far too expensive to

develop because of depth, complexity or remoteness.

Additionally, over two-thirds of the world's oil reserves

are located in countries where Western companies have restricted

access. This includes Iran, Venezuela and Russia as well as OPEC

countries whose strict terms make operations less attractive for

foreign investors.

This all explains why the discovery of enormous, low-cost

oil resources in Guyana a decade ago was considered such a boon

for Western energy companies - and why the two biggest U.S.

producers were willing to spend billions battling for access

to a single field there.

FIRST SHOT

The latest high-profile clash between Exxon and Chevron ( CVX ) may

be an indication of what the industry can expect in the coming

years as competition for low-cost resources intensifies amid the

world's transition away from fossil fuels.

No one knows exactly when global oil demand will peak. While

the International Energy Agency, the global energy watchdog,

expects oil consumption to crest by the end of this decade, OPEC

forecasts demand to grow into 2050.

But, regardless, the industry appears to be going through a

shift, and the Exxon-Chevron clash, one of the most expensive

and consequential legal battles in the sector's history, may be

a harbinger of things to come.

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(Ron Bousso, Editing by Louise Heavens)