£15bn oil and gas merger creates Norway's 'national champion'

international | miscellaneous | other press Tuesday December 19, 2006 13:55 by S.Cat

Yet another story of nationalisation in the oil and gas industry. There may also be some interest in the fact that the attempts to raise consciousness of the potential pitfalls of getting involved in projects like Corrib don't rate a mention.

Norsk Hydro Rig

£15bn oil and gas merger creates Norway's 'national champion'

http://business.guardian.co.uk/story/0,,1974890,00.html

Terry Macalister
Tuesday December 19, 2006
The Guardian

Norway, one of Britain's biggest energy suppliers, yesterday joined the global march of resources nationalism when it merged the oil and gas operations of its two largest energy companies, Statoil and Norsk Hydro.

The move will produce a major offshore operator that will be better able to compete internationally, although the combined group's output will be still less than half that of BP.

"The company will create huge values for Norway, and the merger is an excellent foundation for meeting the challenges facing the oil and gas industry," said Jens Stoltenberg, the Norwegian prime minister. The Norwegian government has previously stymied attempts by the two partly state-owned companies to merge, but changed its mind after Norway's recent failure to win a key part of the huge Shtokman gas project in Russian waters in the Barents Sea.

Shares in Norsk Hydro soared 24% to 193.25 crowns and Statoil was up 2.6% at Nkr 177.50 after the deal was announced in Oslo.

After what amounts to a $30bn (£15bn) takeover of its energy operations, Norsk Hydro will remain a separately-listed group and will concentrate on its other operations: aluminium and power generation. Norsk Hydro shareholders will receive 33% of the newly-merged oil and gas company while Statoil investors will get 67%. The government will initially own 62.5% of the combined group, but will buy stock in the market over time to raise its stake to 67%.

Mr Stoltenberg said Norway's oil and gas industry needed to succeed internationally and not "live or die" in local waters.

The respective chairmen of Hydro and Statoil, Jan Reinaas and Jannik Lindbaek, said: "By combining forces, the new company will be a highly competent and financially strong Norwegian-based energy champion, well positioned to ensure domestic excellence and pursue international opportunities for long-term growth."

Helge Lund, the Statoil chief executive, will take the same position in the new company, while Hydro chief executive, Eivind Reiten, will be chairman and continue to lead Hydro's aluminium arm.

Bruce Evers, analyst with Investec Securities in London, said the deal looked like what he called a typically "incestuous" Scandinavian arrangement. "We think it's Norwegian government-led - an attempt to create a national champion." The real financial benefit could come from synergies, Mr Evers said, but the government and companies were stressing it was about growth, not cost-cutting.

The powerful Norwegian oil workers' union welcomed the deal, which suggested it believed it would not be used as an opportunity to make savings.

Norway is an increasingly large provider of gas to Britain, having recently opened the Langeled pipeline which connects Norwegian gas fields with Easington in east Yorkshire.