Det Norske Veritas, Germanischer Lloyd to Merge Amid Fuel Boom

Det Norske Veritas and Germanischer Lloyd AG will merge to create the third-largest certification, inspection and testing business for industries such as shipping, oil and gas, and renewable energy as fuel developments boom.

DNV GL Group targets 2013 sales of about 20 billion kroner ($3.6 billion), an increase of as much as 10 percent from the companies’ combined sales this year, DNV Chief Executive Officer for Maritime and Oil & Gas Remi Eriksen said in an interview. The combined group is expected to raise sales at the same rate through 2015 on growing spending by fuel developers, he said.

Henrik Madsen will be CEO of the merged group, DNV told reporters today. The company will be based in Hoevik near Oslo and held 63.5 percent by the DNV foundation and 36.5 percent by Mayfair Asset Management, the respective owners of DNV and GL.

Demand for their services has grown after accidents like BP Plc’s Macondo well explosion in the Gulf of Mexico brought stricter safety rules in the oil industry, and as resources become harder to retrieve. Exploration and production companies’ spending will grow 7 percent to a record $644 billion in 2013 on high oil prices, Barclays Capital said in a Dec. 4 note.

Oil-company spending may climb as much as 9 percent a year in the next five years, Oslo-based consultant Rystad Energy said. “Replacing falling production will require more and more effort,” said Partner Per Magnus Nysveen. “A lot of the new production is based on unconventional recovery and deep water.”

Merger Effective

The merger may be effective by the second quarter, Eriksen said, and have about 17,000 workers in more than 100 countries.

It will create the third-largest certification, inspection and testing operation after those of SGS SA-REG and Bureau Veritas SA, according to a DNV presentation.

“On the oil and gas side, we have an ambition of more than 15 percent growth over the next five years,” Eriksen said. “Fields that are being developed today are more demanding, from deeper water and with more complicated reservoirs, so more costly. Then we have unconventional resources, which are complex and technologically demanding projects.”

The oil and gas division will make up 35 percent to 40 percent of the company by 2016, up from about 30 percent now, DNV Chief Financial Officer Thomas Vogth-Eriksen said. While Maritime services will keep growing, they will make up less than the current 30 percent of sales in four years, he said.