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Last Updated: Monday, 18 December 2006, 12:09 GMT
Norwegian firms create oil giant
Statoil's Troll A gas platform
The deal will create a global offshore oil giant
Energy firms Statoil and Norsk Hydro have unveiled plans to merge their oil and gas operations, creating a global industry giant.

The Norwegian companies said the deal would create the world's largest offshore oil operator.

The merged operator would have total oil production of 1.9 million barrels per day, and proven oil and natural gas reserves of 6.3 billion barrels.

Norway is the world's third-largest crude oil exporter.

"The competition [for foreign fields] is extremely tough, and both companies are in a process where we work more and more outside Norway," said Statoil chief executive Helge Lund.

"There has proven to be little point to compete for the same opportunities."

Shares in Norsk Hydro leapt by more than 24% in morning trading on the Oslo stock exchange, while Statoil's shares rose by almost 7%.

'New era'

Founded in 1972
Employs 25,600 staff
Accounts for 60% of Norwegian petroleum production
Revenues of $63bn in 2005

Statoil would dominate the new oil and gas company if the deal goes ahead.

Hydro, which is the world's third largest aluminium company, would focus on its non-oil and gas activities.

Statoil shareholders would hold 67.3% of the combined offshore operator, with Norsk Hydro shareholders owning the remainder.

Founded in 1905
Employs 33,000 staff
Operates 13 oil and gas installations in Norway
Revenues of $28bn in 2005

The Norwegian government, which is a key shareholder in both companies, welcomed plans to merge their operations.

"This is the start of a new era," said Norway's Prime Minister Jens Stoltenberg. "The merger is an excellent foundation for meeting the challenges facing the oil and gas industry."

Under the proposed deal, the Norwegian government would hold 67% of shares in the new operator.


Norsk Hydro boss Eivind Reiten (left) and Statoil boss Helge Lund unveil the deal
Statoil and Norsk Hydro's bosses say the merger deal makes sense

In a joint statement, the companies said the merged operator would be "a highly competent and financially strong Norwegian-based energy champion".

"The recommended merger is driven by an ambition to grow in Norway and internationally," the companies said.

"The industry faces an increasingly challenging international landscape. To merge now makes perfect sense."

Carnegie oil analyst John Olaisen described the merger plan as "very positive" for both companies.

Statoil, which is based in Norway's western port of Stavanger, employs more than 25,600 people in 31 countries.

Oslo-based Norsk Hydro employs 33,000 people in 40 countries.

The companies said they hoped to complete the merger during the second half of 2007. Mr Lund is destined to become the chief executive of the new company, while Hydro's chief executive, Eivind Reiten, will become its chairman.

Mr Reiten will also remain the chief executive of Hydro.

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