Merger creates worlds largest

Statoil and Norsk Hydro, both from Norway, have announced plans to merge their offshore operations in a $29.4 billion deal today. This merger will create the world?s largest offshore oil producer responsible for 80% of output in the Norwegian North Sea.

Norway?s prime minister Jens Stoltenberg welcomed the Statoil-Hydro deal as “the start of a new era” in the country?s petroleum industry and said the government would seek two-thirds ownership of the merged company. Statoil is already the key operator on the offshore fields that make Norway the world?s third largest oil exporter, and Hydro is also a major player.

With a total oil production of 1.9 million barrels per day and proven oil and natural gas reserves of 6.3 billion barrels, a merged Statoil-Hydro would pass Royal Dutch Shell as the world?s largest offshore oil producer, the companies said. Both companies have been expanding internationally, and Statoil president and chief executive Helge Lund said it makes sense for them to work together on such projects.

“The competition for foreign fields is extremely tough, and both companies are in a process where we work more and more outside Norway,” said Lund. “There has proven to be little point to compete for the same opportunities.”

The deal is expected to be completed in the third quarter of 2007, following shareholder and regulatory approval. Hydro?s shareholders will hold 32.7% and Statoil?s shareholders 67.3% of the new company. The government would hold 62.5% of the merged company, but this may be increased to 67%.