Company News: Statoil faces corruption charges for Iraq dealings

Sept. 22, 2003
The Statoil ASA board criticized Statoil Pres. and CEO Olaj Fjell for a $115 million business development contract with Iranian firm Horton Investment, but the board also said Fjell remains the "person best suited to take Statoil forward."

The Statoil ASA board criticized Statoil Pres. and CEO Olaj Fjell for a $115 million business development contract with Iranian firm Horton Investment, but the board also said Fjell remains the "person best suited to take Statoil forward."

The Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim) has accused Statoil of corruption regarding a June 2002 contract to strengthen Statoil's business development in Iran (OGJ Online, Sept. 12, 2003).

Fjell accepted the resignation of Richar John Hubbard, a director with the company, Norwegian newspapers Norway Post and Aftenposten reported.

Meanwhile, Norwegian analysts viewed the deal as "illegally influencing foreign officials," Aftenposten reported.

In other upstream news:

  • The four remaining stakeholders in the 2.92 tcf Yetagun gas-condensate field off Myanmar and its related transmission system have purchased the ownership interest relinquished by UK-based Premier Oil PLC. Premier sold its interest after shareholders pressured it to withdraw from the country, whose government hs been accused of human rights abuse.
  • Houston Exploration Co. of Houston announced plans to buy assets in the shallow-water Gulf of Mexico from privately owned Transworld Exploration & Production Inc., Houston, for $155 million.
  • Austria's state-run OMV AG oil and gas group has signed an agreement to sell its interest in two exploration blocks in Sudan to ONGC Videsh Ltd. (OVL) for $115 million. OVL is the international arm of India's state-owned Oil & Natural Gas Corp. (ONGC). The deal, which will be effective retroactive to Jan. 1, is subject to approval by the Sudanese government and OMV's partners in the blocks.
  • Marathon Oil Corp., Houston, said it would cut 265 jobs as part of an realignment plan expected to yield annual pretax savings of more than $65 million.

Statoil

Fjell announced Sept. 12 that Statoil has canceled "with immediate effect" the consultancy contract, adding that the company would pay Horton no more than $5.2 million, which has already been paid.

At the time the original agreement was signed, Statoil and Horton agreed jointly not to make the deal known to the public, Statoil said.

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Fjell said, "This decision [to cancel the consultancy contract] has been taken in order to remove any doubt whatsoever about Statoil's compliance with its ethical guidelines." He added, "The contract and its media coverage have created an impression that Statoil operates in an ethical borderland. Statoil cannot live with misgivings about the group's ethical standards."

Statoil said it has submitted to Økokrim the requested material from the company's internal review. The company also said that internal assessments carried out before this contract was signed were insufficient.

"It is the board's opinion that Fjell has shown decisiveness and has delivered good results during his 4 years as head of the group. He enjoys respect both within and outside Statoil," and "retains the confidence of the whole board of directors," a Statoil news release said.

The board said it will lend "all possible assistance" to Øko- krim and emphasized that complete clarification of this case is in Statoil's interests. The board chairman apologized to the directors for not informing them collectively of the contract.

The board emphasized that Statoil's international ambitions will be upheld with high ethical standards.

Ottar Rekdal, who was appointed by Fjell as acting executive vice-president for the company's international exploration and production business, temporarily will succeed Hubbard.

Yetagun stakeholders

Premier sold its interest in Yetagun gas-condensate production off Myanmar.

Subsidiaries of Malaysian state oil firm Petronas Carigali Sdn. Bhd., Thailand's PTT Exploration & Production PCL (PTTEP), Nippon Oil Co. of Japan, and state-run Myanma Oil & Gas Enterprise (MOGE) increased their stakes in the production venture on a pro rata basis based on their previous holdings.

As a result, Petronas increased its holding to 40.9102% from 30.0014%, making it the largest stakeholder in the production-sharing license that covers Blocks M-12, M-13, and M-14 in Myanmar's Gulf of Martaban and in the gas pipeline to Thailand.

MOGE boosted its holding to 20.4541% from 15%, while PTTEP and Nippon Oil increased their stakes to 19.3178% each from 14.1667% each. Total value of the transaction was withheld.

PTTEP said it paid Premier $78 million for the additional 5.1511% interest in the deal, effective Sept. 30. Premier Petroleum Myanmar Ltd., a wholly owned Petronas unit, will operate Yetagun field, 400 km south of Yangon (OGJ Online, Aug. 21, 2001).

Yetagun's reserves stood at 26 million boe in September 2002. It is producing 300 MMcfd of natural gas—most of which is delivered to Thailand—plus nearly 9,000 b/d of condensate.

Houston Exploration

Houston Exploration said the Transworld Exploration & Production properties, which are 75% natural gas, have proven reserves of 92 bcfe. Current production is a net 35 MMcfed from 11 fields.

The acquired assets include 86,237 gross acres from 21 blocks. The company will operate 97% of the proved reserves.

Robert B. Catell, Houston Exploration chairman, said of the transaction, "In addition to being accretive to the company's earnings and cash flow per share, it adds high-quality reserves to our drilling inventory."

"We see a lot of upside to these properties," said William G. Hargett, Houston Exploration president and CEO. "Current plans include allocating $40 million to $50 million of our 2004 capital to these fields."

The transaction will have an effective date of July 1 and is expected to close on Oct. 15.

OMV

OMV is divesting its 26.125% working interest in Block 5A, and its 24.5% working interest in Block 5B, both in the Muglad basin, 700 km southwest of Khartoum.

Petronas Carigali Overseas Sdn. Bhd. of Malaysia operates Block 5A, with 68.875% stake. The block contains undeveloped Thar Jath field, which has gross proven and probable oil reserves of 149.1 million bbl. Sudan's national oil company Sudapet Ltd. holds the remaining 5%.

On Block 5B, Petronas has 41%, Sudapet 10%, and Swedish oil concern Lundin Petroleum AB, Stockholm, 24.5%.

Blocks 5A and 5B are adjacent to the Greater Nile Oil Project, where OVL acquired a 25% stake in March from Talisman Energy Inc., Calgary (OGJ Online, Mar. 28, 2003).

Helmut Langanger, the member of the OMV management board responsible for exploration and production, said the company obtained "a good price for our Sudanese exploration interests. The proceeds will now be invested in the further expansion of our oil and gas production."

Marathon

Marathon's organizational efficiencies are expected to account for 45% of the projected savings, with the rest coming from the job cuts, primarily at the Houston headquarters and US production business units. Most changes will be completed by Dec. 31.

The company also said it will reduce or eliminate "a wide range of activities, and their associated costs" considered nonessential, although it did not elaborate.

"Our current overhead cost structure is too high," said Clarence P. Cazalot Jr., Marathon president and CEO.

Marathon expects these activities will result in a pretax charge of $40 million, and it said that 40% of that charge is expected to be recorded in the third quarter with the rest to be recognized when incurred, primarily in early 2004.