Statoil ASA announces a merger between its gas and oil-trading units

Europes second-largest natural gas supplier – Statoil ASA – announced that it plans a merger between its gas and oil-trading units as the differences in trading the two commodities become smaller, and will make the units more competitive after the merger is finalized.

The Executive Vice President for marketing, processing and renewable energy – Eldar Saetre – said in an interview for Bloomberg that the gas supplier is making some plans of merging its gas-trading operations with its liquids unit that is responsible for purchasing and selling crude, condensate, refined products and gas liquids from May the 1st.

Mr. Saetre said for Bloomberg: “Gas markets have gradually changed in Europe, from being based on long-term contracts and oil-indexed price formulas to being a more liquid and fully traded market, such as crude oil. There’s tougher competition and even more players in our markets. That means I see the need to take out cost synergies and improve efficiency.”

Currently, some manufacturers such as Statoil ASA are trying to adapt themselves to the European utilities demand, including the ones of RWE AG. The latter seeks to weaken the tradition of linking gas-supply deals to oil prices. As reported by Bloomberg, this practice has become the reason for losses due to the fact that gas has become cheaper and oil has become more expensive.

According to one of the analysts of Societe Generale SA – Thierry Bros, less than half of wholesale gas in Europe is sold under oil-linked contracts in comparison to almost 100% before the financial crisis in 2008 and an encouragement by European Union regulators in order to liberalize continental markets.

According to Executive Vice President Eldar Saetre, the company is now being “innovative” due to the fact it offers an increasing number of contracts that are adapted to its individual customers. He said that the contracts in question include pricing in correspondence with the spread between electricity and gas prices for power manufacturers.

Mr. Saetre said, cited by Bloomberg: “The market, and gas in general, would be well-served with a development toward hub-pricing. We have played an active role in this.”

As Bloomberg reported, Statoil, along with Royal Dutch Shell Plc and BP Plc, is put under close examination by the authorities in the U.S. and EU on suspicion of manipulating oil benchmarks published by Platts. The company, however, does not have any plans of withdrawing its presence from the Platts pricing system, and refused to make any comments on details of the probes.

Mr. Saetre said: “We dont know why this happened and why we were included in this investigation. We have yet to get any good explanation.”

Statoil ASAs shares rose by 0.82% in Oslo to trade at NOK 159.60 at 13:30 GMT, marking a market capitalization of NOK 506 billion.