The Times: Norwegian $30bn deal creates oil and gas super-player

Natural resources
December 19, 2006
Carl Mortished, International Business Editor

State to control Statoil and Norsk
Largest offshore unit in the world

Norway will create a gas export colossus with the merger of Statoil and Norsk Hydro, which will take a commanding position in the Northern European gas market and become the largest offshore operation in the world.

The two groups said yesterday that they would combine their oil and gas businesses in a $30 billion (£15.4 billion) deal, creating a single entity with the financial and operational power to compete internationally. 
 
The merged business, whose controlling shareholder will be the Norwegian state, will enhance Norway’s market clout in the European gas sector. It will incorporate Norsk Hydro’s expanding gas operations into Statoil, boosting it’s dominant position as marketer of the Norwegian state’s gas holdings.

The Norwegian Government said it would increase its interest in the new company from 62.5 to 67 per cent. It holds 71 per cent of Statoil and 44 per cent of Norsk Hydro.

Norway ships 83 billion cubic metres of gas to Europe annually, an expanding export business of which the largest share is represented by Petoro. The company holds the Norwegian state’s financial interest in the country’s oil and gas reserves.

Gas analysts estimated that the new company would account for 83 per cent of the gas exported from the Norwegian continental shelf, ranking second in European gas to the market leader, Russia’s Gazprom. A further two dozen private enterprises, including Shell, Total and ExxonMobil, also operate in the Norwegian sector, but as minority players.

“It brings them up to two thirds the strength of Gazprom,” said Patrick Heren of Heren Energy, the gas consultancy.

The Nordic energy giant will have a powerful position in the UK market when the Langeled pipeline from Norway to Easington is fully linked to the Ormen Lange gasfield late next year. Together, Statoil and Norsk Hydro will account for two thirds of 20 billion cubic meters the pipe will deliver annually to Britain.

Helge Lund, the chief executive of Statoil, said the merger was an historic milestone. “The time is right for one strong Norwegian-based energy champion. Combining the best of both organisations, we will improve our competitive position internationally and promote long-term vitality of the Norwegian continental Shelf,” he said.

The new company will employ 31,000 people and will produce 1.9 million barrels of oil and gas in 2007 from 6.3 billion barrels of reserves. Beyond the Norwegian continental shelf, the group will be active in West Africa, notably Angola, the Caspian Sea, the Gulf of Mexico and North Africa.

Meanwhile, the Norwegian state has blocked Norsk Hydro’s attempts to expand through merger — notably its flirtation with Britain’s Centrica, a deal that would have required the Norwegian Government’s blessing.

http://business.timesonline.co.uk/article/0,,9072-2511225.html
 

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