Exxon Mobil, the largest U.S. oil company, and the U.S. Interior Department are fighting over a huge oil discovery in the Gulf of Mexico, which contains an estimated 1 billion barrels of reserves. The Interior Department says Exxon's leases have expired and the company has not extension requirements, forcing the company to sue to keep the leases.
Exxon (XOM) previously did not disclose the amount of reserves at the Julia field until it was mentioned in the suit Exxon filed against the Interior Department last week in federal court in Louisiana, the Wall Street Journal reported. If Exxon loses in court, the leases would go back to the government.
Exxon says the move by the government to not extend the leases was a surprise and the now the company must consider the prospect of missing out on what is believed to be the largest Gulf discovery ever. Statoil (STO), Norway's state-run oil producer, owns half of the Julia field.
Making the situation sensitive for Interior is that at current prices, potential royalties paid to the government over the lifetime of a one billion-barrel field would be about $10.95 billion, the Journal reported. The government risks losing out on some of that revenue as selling the leases to another oil company could lead to delays in output.
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