EC gives green light to Chevron-Texaco merger

The European Commission Thursday approved Chevron Corp.'s $36 billion takeover of Texaco Inc., removing a key hurdle in the majors' plans to create the fourth largest oil and gas company. The EC said it would "declare (the merger) compatible with the common market and with the European Economic Area Agreement" on the grounds that the number of areas in which the companies' activities overlapped in Europe was "limited."


By the OGJ Online Staff

LONDON, Mar. 2�The European Commission Thursday approved Chevron Corp.'s $36 billion takeover of Texaco Inc., removing a key hurdle in the majors' plans to create the fourth largest oil and gas company.

The EC said it would "declare (the merger) compatible with the common market and with the European Economic Area Agreement," on the grounds that the number of areas in which the companies' activities overlapped in Europe was "limited." The commission added that where there was overlap the companies' combined market shares remained below 15%.

"The limited overlap between the companies reflects Chevron's focus on its operations outside the EAE (the 15 European Union states plus Norway, Iceland, and Liechtenstein)," said the EC. "Chevron has decided to concentrate its marketing activities in the US, and gradually disposed of its downstream European businesses."

The EC noted that the only business area that would be affected by the merger would be Chevron's 20-30% market share for lubricant additives through its Oronite subsidiary.

"Texaco is not active in these markets, but is present in the downstream finished lubricants market where it has a 5-10% share of all lubricants sales on an EAE scale," the EC emphasized. "But as Chevron's sales in this market are small, and lubricant producers multisource their additives requirements to profit from technological improvement, the commission considered that the new entity's position in the lubricant additives market would not give rise to a foreclosure or other anti-competitive effects in the market."

The EC also noted that the additives supply market is characterized by four "equally strong" competitors in the form of Lubrizol Corp., Ethyl Corp., Oronite, and Infineum�a joint venture between ExxonMobil Chemical Co., Shell Petroleum Co. Ltd., and Shell Oil Co.

The companies announced their all-stock merger last October. Chevron said it would create a combine benefiting from yearly cost savings of "at least $1.2 billion" within 6-9 months of the merger's completion. The enlarged global operations of ChevronTexaco, it said, would represent reserves of 11.2 billion boe, daily production of 2.7 million boe, and assets of $77 billion.

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