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The Wall Street Journal: StatoilHydro Chairman Reiten Resigns

By GUY CHAZAN
October 5, 2007; Page A12

A merger creating one of Europe’s largest energy companies was overshadowed by scandal yesterday when the chairman of the new entity resigned over a corruption investigation.

Eivind Reiten said he was standing down as chairman of StatoilHydro ASA over a probe into the Libyan portfolio of Norsk Hydro, one of the two companies involved in the merger.

The resignation of Mr. Reiten, a former Norwegian oil and energy minister and one of Norway’s most high-profile businessmen, is embarrassing for StatoilHydro, which made its debut on the stock exchange Monday. The company was formed in a $35.5 billion merger of Norwegian energy giant Statoil ASA and Norsk Hydro’s oil and gas division.

StatoilHydro, whose shares are traded in Oslo and on the New York Stock Exchange, is the world’s largest offshore operator and Europe’s fifth-largest oil and gas producer behind BP PLC, Royal Dutch Shell PLC, France’s Total SA and Italy’s Eni SpA, with production of 1.7 million barrels of oil equivalent a day in 2007. Norsk Hydro’s aluminum and energy interests were spun off into a separate company, which retains the company’s name, and Mr. Reiten will stay on as chief executive.

The probe into Hydro is focusing on the company’s 1999 acquisition of Saga Petroleum, which among other assets owned two oilfields in Libya. As part of the deal, Hydro also inherited agreements Saga had entered into to pay an unnamed consultancy large fees to obtain further exploration space in Libya.

On Monday, StatoilHydro said it had obtained additional information about the Libyan portfolio, which became part of the merged company, that it said needed to be investigated. StatoilHydro said it had appointed outside lawyers to look into the consultancy agreements. Also on Monday, Norsk Hydro said it had chosen to terminate the agreements because it couldn’t be sure they were in compliance with its ethical guidelines. It didn’t say when that decision had been made.

Then, in another statement yesterday, Hydro said a preliminary investigation had revealed that the company “may have had more extensive contact, and made more active use of the consultancy firm in question than has previously emerged.” It said it had turned the matter over to the Norwegian police’s economic-crime unit.

In a statement, Mr. Reiten said that staying on as StatoilHydro’s chairman while Norsk Hydro was being investigated would present a conflict of interests and that “after careful consideration” he had decided it was right to stand down as chairman.

Speaking on Norwegian TV, StatoilHydro CEO Helge Lund said he was sad that Mr. Reiten had chosen to resign, but said he respected him “for putting the interests of the company before his own personal interests.”

StatoilHydro said Marit Arnstad, currently deputy chairman, will take over as acting chairman.

It is the second major scandal to hit Norsk Hydro in recent weeks. In August, the Norwegian government, which had a 43.8% stake in the company, fired Chairman Jan Reinaas over a $36 million payout to terminate the company’s executive stock-option program.

The payment caused an uproar in Norway, with critics calling it excessively generous and saying it breached government rules prohibiting the granting of stock options in state-owned companies.

Write to Guy Chazan at [email protected]

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