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FTSE dominance beckons for oil and gas

THE BUSINESS: FTSE dominance beckons for oil and gas

Sunday 26 June 2005

By: Richard Orange

THE oil and gas sector is set to depose the financial sector as the most valuable on London’s FTSE index within months of Royal Dutch Petroleum merging with Shell Transport and Trading on July 20.

Shareholders meet on Tuesday to vote on whether to merge the two companies, setting in motion a process that index analysts expect to lead to the first change in the top FTSE sector since banks jumped in front of telecoms as the technology bubble burst in 2000.

It will be the first time the oil and gas sector has been dominant, as measured by today’s FTSE classifications, since it held thrall in the 1980s.

When Royal Dutch leaves the Amsterdam stock exchange and begins trading on a single listing with Shell Transport and Trading, going under the name of Royal Dutch Shell, it will add an extra 72bn (E108bn, $131bn) in value to the oil sector on the FTSE.

On Friday’s prices this would boost the market value of the oil sector to some 271.4bn from 199.5bn, bringing it neck and neck with a financial sector, worth 274bn.

Robert Parks, UK equity strategist for HSBC said: “The two sectors have been going in completely different directions this year – banks have been pretty weak. The way prices have been moving that gap could soon be lost. A daily move could push it ahead.”

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