How Exxon (XOM) May Snag Seven Trinidad Blocks Without Bidding

Globe and Mail

5 days ago

Exxon Mobil (XOM) is in talks with Trinidad and Tobago to explore up to seven deepwater blocks off the country's east coast, marking a potential return two decades after it exited following failed drills. The acreage sits north of Guyana's Stabroek block—where Exxon, Hess (HES) and CNOOC have booked more than 11 billion barrels—and could extend the basin's prolific geology across the maritime border. Trinidad's new government wants fresh offshore investment to backstop its LNG and petrochemical complex after a Venezuela-linked gas project stalled. While a deepwater auction now closes Sept. 17 without Exxon's preferred tracts, law allows one-off negotiations for unauctioned areas—an opening Energy Minister Roodal Moonilal hinted at this month. Market Overview:
Supermajors keep chasing Guyana-Suriname basin scale as legacy fields mature
Trinidad seeks gas feedstock to sustain LNG capacity amid regional geopolitical snags
Direct negotiations outside formal bid rounds highlight flexibility in smaller producers' licensing
Key Points:
Exxon is negotiating for seven ultra-deepwater blocks adjacent to Guyana's Stabroek
Current Trinidad auction excludes those blocks, but statutes permit bespoke deals
Hess remains Exxon's key U.S.-listed partner in Stabroek; CNOOC is state-owned China-listed
Looking Ahead:
A deal could give Exxon control of most remaining unlicensed ultra-deepwater acreage
Success would redirect capital back to Trinidad after a 2003 exit and bolster LNG feedstock
Regional discoveries will likely spur more cross-border JV talks and infrastructure sharing
Bull Case:
Exxon Mobil's potential return to Trinidad and Tobago's deepwater sector—adjacent to the prolific Guyana Stabroek block—gives it a shot at unlocking major new reserves in one of the world's hottest exploration frontiers, leveraging proven geological continuity across maritime borders.
If negotiations succeed, Exxon could secure control of most remaining unlicensed ultra-deepwater acreage, preempting rivals and establishing a dominant regional footprint as Hess transitions into Chevron and competitive dynamics shift.
Success would channel capital and expertise back to Trinidad after a 20-year absence, directly supporting the country's LNG and petrochemical infrastructure and providing a strategic hedge against Venezuela-related supply risks.
The government's willingness to negotiate outside standard bid rounds indicates regulatory flexibility, enabling majors like Exxon to pursue high-impact tracts even when auctions misalign with exploration priorities.
Any material discoveries would likely catalyze follow-on cross-border partnerships, JV infrastructure, and new LNG feedstock, potentially enhancing regional energy security and boosting Trinidad's global gas relevance.
For investors, incremental Guyana-basin barrels bolster Exxon's resource base, offering upside that could counterbalance long-term energy transition headwinds and reinforce the company's growth narrative despite broader sector discipline.
Bear Case:
Despite attractive geology, Exxon's re-entry into Trinidad deepwater comes with substantial exploration risk, given its prior exit in 2003 following unsuccessful drilling—future wells remain unproven and capital commitments could be high with no guarantee of commercial discoveries.
Heavy reliance on bespoke negotiations, rather than formal auctions, may expose Exxon to political and regulatory uncertainties—future governments could renegotiate terms or face pressure from local stakeholders if expectations are not met.
Trinidad's urgent need for new offshore investment stems partly from stalled Venezuela-linked gas projects, underscoring regional instability and the potential for delays or further geopolitical snags affecting future developments.
Even with a deal, monetizing discovered resources likely requires substantial infrastructure investment; success will depend on multi-party cooperation, regulatory clarity, and ongoing stability in LNG and global gas markets.
The project's capital intensity and multi-year timeframes risk tying up resources in a region facing ongoing energy transition pressures, intensifying investor scrutiny over large-scale hydrocarbon projects without clear and timely payback horizons.
Should the new blocks prove less prolific than the Stabroek analogs, Exxon may be forced to write down investments or scale back ambitions, harming both local development prospects and its offshore Atlantic Basin strategy.
If Exxon secures terms, Trinidad gains both marquee capital and a strategic hedge against Venezuelan uncertainty; for Exxon, the move shores up optionality near a core growth hub without diluting focus. The negotiation route also signals how resource-hungry majors leverage legal flexibility when bid rounds misalign with geologic ambition. For investors, the calculus hinges on whether incremental Guyana-basin barrels can offset global spending discipline and energy-transition pressures. With Hess set to be folded into Chevron (CVX) pending approvals, Exxon's Trinidad push could preempt competitive encroachment and lock in basin synergies before the next auction window opens.