Everybody's Happy

18 December 2006



Norway’s Statoil and Norsk Hydro to Merge

Norway’s energy firms Statoil and Norsk Hydro are to merge. The resulting entity will be the world’s largest offshore oil operator. Its daily production will be 1.9 million barrels daily, and it will have proven reserves of 6.3 billion barrels. The reason, as the press statement put it, is simple, “The industry faces an increasingly challenging international landscape. To merge now makes perfect sense.”

Statoil shareholders will get about 67.3% of the new company. Since the largest shareholder in both is the Norwegian government, the state will retain a 67% stake in the new firm. The market loves the idea. Hydro shares were up to 25% to 195 krone on the news, while Statoil shares rose 7.5% to 186 krone. There is no financial down side, apparently.

Statoil chief executive Helge Lund will be the CEO of the new company. Hydro's chief executive, Eivind Reiten, will become its chairman. The 58,000 or so who now work for one or the other will get to keep their jobs. Statoil will be in charge of the oil and gas business, while Hydro, which also happens to be the world’s third largest aluminum company, will look after the non oil and gas interests of the new entity, focusing in particular on developing hydroelectric and solar power businesses.

Of course, this being Europe, the unions have a say in what happens. Yet, once again, the deal makes everyone happy. The country’s largest union, the LO, said the merger would actually strengthen the country’s oil industry. This is in perfect agreement with what the Norwegian Oil Industry Association said, “With a starting point on the Norwegian continental shelf, the new company will be in a unique position to further develop the global oil and gas industry.”

The shareholders will have to vote on this, and it is unlikely that the official OK is stamped on the documents before the third quarter of 2007. Then, the actually merging of operations can go forward, but that will take time as well. Look for a new Norwegian oil company in 2008, just in time to see Vladimir Putin leave the presidency of Russia and find out who the new power behind Gazprom, a big rival, will be.

© Copyright 2006 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.


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