By OGJ editors
HOUSTON, Dec. 27 -- The merger of Statoil ASA's and Norsk Hydro ASA's oil and gas businesses will create an upstream player whose most important future international operations will be in the deepwater Gulf of Mexico, Wood Mackenzie analysts said.
"For both companies exploration, particularly in the deep water, has been a key focus," WoodMac said in a research note. "In particular, the US deepwater Gulf of Mexico is a key target area for each."
Both Statoil and Norsk Hydro recently acquired assets in the gulf. Statoil had exited the gulf previously and then returned to the deepwater gulf in 2004 through a transaction with Chevron.
Later, Statoil acquired Encana Corp.'s deepwater assets for $2 billion and Anadarko Petroleum Corp.'s assets for $900 million (OGJ, Nov. 10, 2006, p. 36).
"The acquisitions have given Statoil stakes in the world class Tahiti project as well as other high profile potential developments such as Knotty Head, Big Foot, and Jack," WoodMac said. "Norsk Hydro also significant increases its interests in the deepwater GOM area with the $2.45 billion acquisition of Spinnaker."
Spinnaker's assets included the producing Front Runner field and a number of development projects in the Independent Hub platform area. Norsk Hydro acquired Spinnaker in 2005 (OGJ Online, Sept. 19, 2005.)
Analysts expect that more acquisitions could be forthcoming once the merger is completed.
"In our view, we expect to see further moves to develop and grow the international business," WoodMac said. "With the much improved economies of scale, there will be increased opportunities to leverage off its strong domestic frontier and international deepwater credentials to compete for new projects."
The combined company has commercial interests in 15 countries outside Norway. In Africa, this includes stakes in onshore Algeria, deepwater Nigeria, and Libya.
"Other key assets include the Sincor heavy oil project in Venezuela's Orinoco Belt and the deepwater Chinook project in Brazil," WoodMac said. "In addition, Norsk Hydro's stake in the Azar oil discovery in Iran offers good upside."
Statoil and Norsk Hydro also have extensive acreage in the UK North Sea, the Norwegian North Sea, and the Barents Sea. Analysts said the Barents Sea offers excellent potential although it is technically challenging and considered high risk.