Aftershocks will follow the takeover by Norsk Hydro AS of Saga Petroleum AS and the anticipated takeover of Elf Aquitaine SA by TotalFina SA (see story, p. 23).
The Norwegian government`s strengthened position after the Hydro-Saga deal is likely to deter foreign investors, while if TotalFina absorbs Elf as planned, the weakness of other companies will stand out.
Wood Mackenzie Consultants Ltd., Edinburgh, said many people suspect the government was behind the deal between Hydro and state firm Statoil AS to keep Saga in Norwegian hands (OGJ, June 28, 1999, Newsletter).
Statoil was able to "cherry-pick several key assets" from Saga`s portfolio, with Hydro taking the rest, WoodMac said. So Statoil boosted its already strong interests in Norway`s Troll and Haltenbanken areas, for example, while Hydro pounced on Saga`s gas export infrastructure.
Closed shop
Wood Mackenzie said the Saga takeover raises key issues that Norway`s authorities must solve to retain the interest of international players.
"The high level of state control," said Wood Mackenzie, "through either direct financial interest or Statoil-Hydro shareholdings, can only be seen as a negative. The danger is that, to potential new participants, the impression of a `closed shop` has been reinforced.
"With such a large proportion of the domestic E&P asset base held by two dominant operators, there is a glaring lack of diversity on the Norwegian shelf and a risk of development activity stagnating through the stifling of competition.
"With industry consolidation giving rise to a dominant breed of megamajor companies, the question arises as to whether the foreign players can justify their ongoing presence, given the relatively small part of the remaining assets base in Norway that they can access."
Whether any of the crumbs from the Saga portfolio are thrown to the independents-post-takeover clear-outs are an important way for small firms to buy assets-remains to be seen.
New targets
Tim Whittaker, senior analyst at Commerzbank, London, believes asset sales following these deals and earlier mergers could trigger further takeovers.
"One of Europe`s largest independents has gone with the demise of Saga," said Whittaker. "The two largest U.K. independents, Lasmo plc and Enterprise Oil plc, discussed a merger recently but decided not to get together.
"Now Lasmo and Enterprise are sitting ducks-we just have to wait to see who wants to buy. Sooner or later, other companies will have a run at them, and at other independents, to benefit from the cupboard-clearing of assets by the majors."
Higher up the food chain, Whittaker reckons Chevron Corp. is under the most pressure to act, now that the combination of TotalFina and Elf would dislodge it from its position as the fourth largest petroleum company.
"Chevron will suddenly find itself in the number five position and strongly lagging the supermajors," said Whittaker. "Chevron and Texaco Inc. discovered a clash of cultures and couldn`t get it together. But Texaco is quite a bit smaller than Chevron, so the pressure is on Chevron to build and improve its performance or be left even further behind."