In December 2006, the boards of the two largest oil companies in Norway – Statoil and Norsk Hydro – began formal talks on the possibility of forming a merger. The government, which has a large stake in both companies, reacted positively to the merger plans. The trade unions concerned were also supportive of the plans to merge.
In December 2006, the boards of the two largest oil companies in Norway, Statoil and Norsk Hydro, began formal talks on a possible merger between Statoil and the energy division of Norsk Hydro (see press release 18 December 2006). The proposed merger will result in what is likely to be the largest offshore oil company in the world. The current centre-left government has pledged its commitment to retain a large state ownership share in the new company (NO0612039I). At the same time, the trade unions affected by the proposed merger were mainly positive about the merger.
Company profiles
Statoil is Norway’s largest oil and gas company, with approximately 25,000 employees worldwide. It accounts for 60% of all Norwegian petroleum production. The state is a majority shareholder in the company, holding 70.9% of the company’s shares. Norsk Hydro is also a major offshore producer of oil and gas, and the third largest aluminium supplier in the world, as well as being a major player in the area of renewable energy sources. The company has 33,000 employees in total, and its head offices are located in Norway’s capital city Oslo. The state currently owns 43.8% of Norsk Hydro’s shares.
Plans for merger
On 18 December 2006, Statoil and Norsk Hydro publicly announced that formal discussions would take place on a possible merger between their oil and gas operations. The new company, which is so far without a name, will have an estimated turnover of around NOK 560 billion (about €69 billion as at 1 February 2007), and an output of almost three million barrels a day (see news article (in Norwegian) 18 December 2006). It is also envisaged that the new company will have a presence in nearly 40 countries, employing approximately 31,000 people, of whom about 5,000 will come from Norsk Hydro. Separate from its energy division, the latter will continue as a global aluminium company, which will not form part of the new merged enterprise.
The proposed merger is also subject to approval by the general assemblies of the two companies, as well as by regulatory authorities. The final decision will rest with the European Commission, although the EFTA Surveillance Authority (ESA) of the European Free Trade Association (EFTA) will also need to be consulted on the matter. Thus, a final decision in relation to the proposed merger is not expected until the third quarter of 2007.
In general, there seems to be political consensus about the desirability of the merger. The Norwegian Prime Minster, Jens Stoltenberg, made a public statement outlining the government’s opinion on the matter, highlighting that ‘it is important for Norway to have a large oil company, with the state as a majority owner, in order to strengthen competitive standing abroad’ (see government press release 18 December 2006). Moreover, the government has pledged to retain and increase state ownership in the new company. It has also agreed not to interfere in the ongoing merger process, other than by applying the normal channels for ownership control through the general assemblies. However, the government has underlined the importance of involving the employees and their trade unions in the process. It is estimated that the state will hold approximately 62.5% of shares as a result of the merger, which the present government has pledged to increase to 67%.
Social partner views
While the representative trade unions in Statoil and Norsk Hydro have reacted positively to the planned merger, they have emphasised the importance of union involvement in the merger process. The largest trade union present in the two companies, Industry Energy (Industri og Energi, IE), will have slightly more than 4,000 members in the new company. IE welcomes the merger, on condition that no employees are made involuntarily redundant, that the state retains a large ownership share, and that the new company’s head offices are located in Stavanger on the southwest coast of Norway. A number of other trade unions present in the two companies are also in favour of the merger, but underline the importance of the management’s close cooperation with the unions. The trade unions in question have established a coordination committee in order to strengthen their position and influence in the merger process.
The Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon, NHO) stated that the decision to merge will result in a significant strengthening of Norwegian oil and gas activities abroad. This view is also shared by its member association the Norwegian Oil Industry Association (Oljeindustrien landsforening, OLF).
Håvard Lismoen, Fafo Institute for Labour and Social Research