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Thursday, 08 January, 2009, 19:40 GMT | more >>

Rejig 'on cards' after StatoilHydro tie-up



By Upstream staff 

Norway's government may suggest minor changes in the way its offshore oil and gas fields are run to ensure competition after the merger of the country's two leading players, Statoil and Norsk Hydro.

Analysts said a long-awaited government report on the merger, to be published tomorrow, could envisage the new company giving up its status as operator in some smaller fields where Statoil and Hydro combined hold minority stakes.

Or it could suggest the group sell or swap its minority stakes but in a way that would not dilute the dominance of Norwegian players on their shelf, which runs from the North Sea to the Barents Sea in the Arctic.

In December, Statoil said it was taking over the oil and gas business of Norsk Hydro in a nearly $30 billion deal expected to be completed in the third quarter of 2007.

Norway's Petroleum Directorate said maintaining competition on the shelf, where the two companies jointly own 34% of remaining proven resources and account for more than 80% of production, would be a challenge. Norway's Petroleum Minister Odd Roger Enoksen said asset swaps were an option.

"I don't see any dramatic changes from the report," Eric Nasby, an analyst at Handelsbanken in Oslo, told Reuters.

"Perhaps the state could try to redistribute operatorships in fields where StatoilHydro hold small stakes or even suggest asset swaps, but not in fields that could impact the group."

Statoil has 28 operator deals in fields in operation or approved for development, while Hydro has 12. Other leaders are BP, ConocoPhillips, ExxonMobil and Talisman Energy, each with four operatorships.

The government has backed the merger, saying the new national champion will gain bulk and reach to grow internationally. It plans gradually to raise its stake in the group to 67% from 62%.

"The government has already said 'yes' to the merger without setting the conditions (to ensure competition on the shelf)," said Kjetil Bakken, an analyst at Fondsfinans. "It will be interesting to see if they send any signals about how they plan to award licences in the future - whether they will actively try to favour other players."

Analysts said "constructive disagreements" between Statoil and Hydro had often led to better and more innovative development of Norwegian fields. For years this was the state's leading argument for keeping the two companies independent.

To offset this potential threat, the report may call for the beefing up of Petoro, the company that holds stakes in oil and gas fields for the government, and the Norwegian Petroleum Directorate, a state agency that guides the shelf's development.

Another concern in the Statoil-Hydro tie-up is that the new group will gain too much sway over oilfield service contractors. Some saw Statoil's decision to cancel some contracting work as a flexing of muscles to prevent creeping inflation in services.

But analysts said that as long as demand for offshore services remains high, competition from other petroleum-rich regions would prevent Statoil from having too much power.

After absorbing Hydro, Statoil will be the world's biggest deep-water oil producer, with output seen at 1.9 million barrels of oil equivalent per day in 2007.

Thursday, 29 March, 2007, 12:55 GMT  | last updated: Thursday, 29 March, 2007, 12:55 GMT

Weighing up moves: Odd Roger Enoksen
 

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