| BUSINESSWEEK ONLINE : JUNE 14, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
Is Norway's Oil Patch at Last Open to Outsiders? (int'l edition) A bidding war may have cracked Norway's protected market Norway is developing a reputation as the European country that can say no. It has opted to stay out of both the European Union and the new monetary union. It stubbornly refuses to pare back its cushy social welfare system. And the government has routinely limited foreign involvement in the oil industry, Norway's economic backbone. That means keeping tight control over drilling concessions and holding on to 100% of national oil giant Statoil. But a bizarre battle between Statoil and another state-controlled energy player may have cracked the door open for non-Norwegian companies. The fight is over Saga Petroleum, Norway's only privately owned oil outfit. Even though Saga controls some choice properties in Norwegian waters, it turned in a $51 million loss in the first four months of 1999, compared with a $36 million profit for the same period last year. Saga's poor performance has made it vulnerable. Now, the feud over its ownership could change the rules for foreign companies scouting for energy companies in Norway. The Saga saga began on May 10, when Norsk Hydro, the 51%-state-owned hydroelectric concern, announced a stock swap bid for Saga. Hydro's move annoyed Statoil, which already owns 20% of Saga. Statoil was preparing a counterbid when the government encouraged the two companies to get together. They hammered out a plan under which Statoil would accept Hydro's bid for its 20% stake. But instead of receiving Hydro stock, as other shareholders did, Statoil would get to keep about 25% of Saga's assets: Thus Saga would cease to exist as a private company. According to Statoil and Hydro, the deal is worth about $1 billion. FREE-FOR-ALL. But nationalizing Saga seems likely to backfire. Foreign companies, which have long coveted Saga's North Sea oil properties, can't resist getting involved. In late May, France's Elf Aquitaine announced a $2.2 billion cash bid, some $15 a share. Saga shares, which had been falling steadily in the past 12 months, jumped to that level following Elf's offer (chart). Elf apparently has the approval of Saga President Diderik Schnitler, who believes that Elf will maintain the company as an autonomous subsidiary. Analysts say that other oil companies--including Chevron; Mobil, which is being acquired by Exxon; and possibly even German energy giant RWE--may join the fun with bids of their own. It's unlikely that Hydro can beat these offers. But Statoil management says it has the full backing of the Norwegian government to bid on its own for Saga--an indication of how badly Norway wants to keep the company Norwegian. Adding Saga wouldn't help Statoil's bottom line, which is already suffering. Thanks in part to lower oil prices, the national champion's net profits for 1998 were only $35 million, down 93% from 1997, on revenues of $13.9 billion. Statoil's return on capital employed is 1.8%, compared with 8.4% for Elf. Some suggest that Statoil should be partially privatized and that the Norwegian government should consider selling part of its controlling stake in Norsk Hydro. Instead of reducing competition by absorbing Saga Petroleum into Hydro and Statoil, analysts say, the government should encourage foreign companies to come in and improve the cost efficiencies. ''As a rule,'' says Oystein Noreng, director of Norway's Center for Energy Policy Studies, ''public ownership causes higher costs and lower profits.'' OUT OF REACH. Oddly enough, even top Statoil management is sick of the way the company is run. Earlier this year, company director Arve Johnsen said the government should cut its stake in Statoil and seek corporate partners in Europe, the U.S., and Asia. Meanwhile, Saga is doing all it can to drive its price beyond Hydro's and Statoil's reach. Schnitler is continuing talks with Elf and other potential foreign buyers. With its American depositary receipts traded in New York, Saga already has 34% foreign ownership: The biggest chunk is an 11% stake Chase Manhattan manages. Those investors will undoubtedly go with the best offer. If the Norwegian government takes the hint and realizes Saga is a publicly owned company, not a state asset, the thin end of the wedge could be driven into its protectionist oil policies. Saga shareholders would be served best if the government allowed more foreign participation in their company. That maxim could be applied to Norway's whole energy industry. By Ariane Sains in Stockholm _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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RELATED ITEMS Is Norway's Oil Patch at Last Open to Outsiders? (int'l edition) CHART: An Oil Independent Is in Play INTERACT E-Mail to Business Week Online | |||
