The U.S. Federal Trade Commission (FTC) is allowing Chevron to purchase rival oil producer Hess Corporation for $53 billion but has banned it from appointing Hess CEO John Hess to its board of directors, citing concerns over his alleged communications with leaders of the oil cartel OPEC.
The commission voted 3–2 to accept a proposed consent agreement banning Chevron from nominating, designating, or appointing Hess to the Chevron board as a condition for the transaction to move forward, according to an Oct. 1 statement.
Under the consent order, Hess is also barred from serving in an advisory or consulting capacity to, or as a representative of, Chevron or the Chevron board, the agency said.
In a partially redacted legal complaint, the FTC alleged that Hess had “for years” communicated both publicly and privately with representatives of the Organization of Petroleum Exporting Countries (OPEC) as well as an unnamed official from Saudi Arabia about global oil output and inventory management.
During those discussions, Hess allegedly stressed the importance of oil market stability and inventory management and encouraged the officials “in their stated mission to stabilize global oil markets,” the FTC wrote in its complaint.
Hess also made public statements praising OPEC policy, according to the agency.
Although large parts of Hess’s private communications are re-created in the legal complaint, the agency said Hess signaled his approval of OPEC’s actions in the market in multiple public statements.
In one such public statement, Hess praised OPEC as being “very, very clever, intelligent, wise in how they brought their oil back,” which is consistent with his private communications with OPEC representatives, the FTC said.
On another occasion, Hess said Saudi Arabia did a “masterful job leading OPEC plus [+], giving the market what it needs, but not oversupplying it,” and that he believes OPEC “has done a great job managing the oil market,” according to the FTC’s complaint.
OPEC+ includes the 13 members of OPEC and 11 other non-OPEC members.
The FTC said in its complaint that contacts between competitors about their commercial practices regarding output, prices, or other “competitive dimensions,” whether made publicly or privately, can undermine free and fair competition and violate antitrust laws.
“Communications by oil executives that support and encourage OPEC members and foreign oil ministers to stabilize oil output and prices can facilitate opportunities for oil executives to act in support of these objectives,” the FTC said.
If Hess were to join Chevron’s board, it would “meaningfully” increase “the likelihood that Chevron would align its production with OPEC’s output decisions to maintain higher prices,” the agency said in a legal complaint.
“Mr. Hess’s communications with competitors about global oil output and other dimensions of crude oil market competition disqualify him from serving on Chevron’s board of directors,” Henry Liu, director of the FTC’s Bureau of Competition, said in a statement.
Hess Says FTC Concerns Are ‘Without Merit’
Chevron said in a statement that it has agreed to the FTC’s key closing condition and that Hess will not be appointed to the Chevron board of directors.Instead, he will serve as an adviser to Chevron on “government relations and social investments” in the South American nation of Guyana as well as on support for the Salk Institute’s Harnessing Plants Initiative.
“I have the utmost respect for John, the company he has built, and the contributions he has made to our industry,” Chevron Chairman and CEO Mike Wirth said.
“It is unfortunate that our board of directors will not get the benefit of his decades of global experience, but we look forward to drawing upon his knowledge, relationships, and experience in Guyana through his service as an advisor to Chevron.”
Hess Corporation said its board of directors believes that the competitive concern raised by the FTC about Hess’s communications is “without merit” and that it fully supports the CEO in his role at the oil giant.
“For more than 10 years, I have advocated for a significant increase in global investment, both in oil and gas and renewable energy, to have the necessary supply to keep energy affordable and secure for American consumers in the future,” Hess said in a statement.
Still, the two oil companies face Exxon Mobil’s challenge to the deal, which centers on the takeover of Hess’s oil assets in Guyana.
Exxon, which owns 45 percent of the consortium operating the offshore field in Guyana, has argued that it has a right of first refusal to Hess’s 30 percent stake in the project, while both Hess and Chevron have said Exxon does not have that right.
Exxon’s ongoing challenge to the deal means it will likely stretch deep into next year.
