Billionaire Roekke’s Det Norske Condemns Statoil’s Dominance

Det Norske Oljeselskap ASA, the Norwegian oil producer controlled by billionaire Kjell Inge Roekke, called on authorities to increase competition with Statoil ASA as a way of curbing rising costs.

Norway should alter framework conditions to improve competition and check the dominance of Statoil, which operates more than 70 percent of the nation’s oil and gas output, Det Norske’s Chief Executive Officer Karl Johnny Hersvik said today in a presentation in Stavanger, on Norway’s west coast.

“Fundamental competition in the operative production space is to be one of the key elements needed to turn the cost curve,” said Hersvik, who joined Det Norske in May from Statoil. “Even excellent companies need excellent competitors. And I think we’re lacking.”

Norway, western Europe’s biggest oil and gas producer, has seen costs increase by about 10 percent a year during the past decade, according to Rystad Energy AS, an industry consultant. Companies including Statoil are now reining in record spending to improve returns, delaying projects and curbing forecasts for long-term production.

Norway’s Petroleum and Energy Minister Tord Lien said in February that Norway wants to attract more, large producers to compete with Statoil, after 13 consecutive years of declining crude output. While the government hasn’t proposed any measures to achieve that, they could include favoring smaller companies when awarding operatorships, Hersvik said in an interview today.

Limited Operatorships

“We haven’t been able to spread operatorships sufficiently,” the CEO said. “I fundamentally believe in competition, and I think all companies would improve with more competition in operatorships.”

Statoil’s position in Norway is a strength for the industry as a whole, spokesman Oerjan Heradstveit said in an e-mailed response to questions.

“Statoil has spent 40 years building up competence and developing the Norwegian shelf,” he wrote. “New operatorships will be very important for Statoil.”

Statoil this year launched an efficiency program meant to save it $1.3 billion a year from 2016. Those efforts will be important to boost Norway’s overall competitiveness in the coming decades, Heradstveit said.

Johan Sverdrup

Det Norske, 50 percent-owned by Aker ASA, the investment company controlled by Roekke, in June agreed to buy $2.7 billion of assets from Marathon Oil Corp., a deal scheduled to close by the end of the year. That acquisition, which increases its output 14-fold, makes Det Norske Norway’s second-largest listed oil company in terms of domestic production.

The purchase ensures Det Norske is fully funded until Johan Sverdrup, the biggest oil find off Norway in decades, starts production in 2019. While Hersvik said the company’s improved cash flow could give rise to discussions about dividends, he declined to say when payouts may begin.

The CEO declined to comment on a report by Upstream that Statoil, the biggest stakeholder in Sverdrup, will be operator of the field, thwarting the ambitions of Lundin Petroleum AB. Det Norske won’t comment on internal discussions between the field’s partners, Hersvik said.

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