By Kemol King

GEORGETOWN (Reuters) - U.S. oil major Exxon Mobil and partners have pulled out of negotiations with Guyana's government on terms for exploring and developing a shallow-water oil block, the South American country's vice president said on Thursday.

Exxon, U.S.-based Hess and China's CNOOC won offshore block S8 in a bidding round launched in late 2022 by President Irfaan Ali's administration in a move to diversify Guyana's energy industry.

The companies had been engaged this year in negotiations for the non-fiscal terms of the project, according to Exxon and government officials.

"Exxon pulled out," Vice President Bharrat Jagdeo told reporters in a briefing. "They wanted to use the area for carbon capture and storage, and we don't want to do that at this stage."

Partners Hess and CNOOC also withdrew from the talks, Natural Resources Minister Vickram Bharrat said.

Exxon, Hess and CNOOC did not immediately reply to requests for comment.

Eight of the 14 oil and gas blocks Guyana offered in the round received bids, including by large companies such as Petronas, CNOOC and TotalEnergies.

The government said last month that TotalEnergies, Qatar Energy, Petronas, Cybele Energy, Delcorp and International Group Investment have reached agreements with Guyana over terms of production sharing deals; and added that an agreement for Exxon's area was "under review," without elaborating.

The auction was organized to expand Guyana's energy industry. But as the Exxon consortium quickly ramps up output, which has increased to some 660,000 barrels per day (bpd) only five years after inauguration, the group continues controlling all production in the country.

Earlier this week, neighbor Suriname announced Exxon had withdrawn from offshore block 52, one of the most promising oil and gas projects in the country, leaving the area entirely to operator Petronas.

(Reporting by Kemol King; Editing by Marianna Parraga; Editing by Marguerita Choy)