Shell eyes takeover of partner Fletcher Energy

By Michele Simpson

Friday 16th June 2000

Edwin Johnson

The country's biggest oil company Shell has signalled it may be one of the parties interested in acquiring competitor and venture partner Fletcher Energy.

But any further investment here by the global oil company would have to be sanctioned by its offshore shareholders.

"There has to be an economic case that will stand up against other attractive opportunities," Shell New Zealand's chairman and chief financial officer Edwin Johnson said.

"Here in New Zealand we are competing with the likes of Malaysia, China and India [for foreign investment]," he said.

He would not declare how serious Shell was about buying out its competitor and venture partner here, Fletcher Energy. "We're always looking," he said.

The Fletcher Challenge board is meeting in August to discuss restructuring proposals for its building and forests divisions as well as Fletcher Energy.

It is thought a trade sale is possible for Fletcher Energy following the sale of the paper division to Norway's Norske Skog but management of the company is thought to be keen to keep it listed here.

Fletcher Energy is a major partner with Shell and Todd Petroleum Mining in the Maui project - the country's largest oil, gas and condensate resource.

In the Taranaki Basin, Fletcher Energy also has a joint deal with Preussag Energie GmbH along with Todd and Shell in the Pohokura-1 well.

Shell and Fletcher are also both involved in other potential energy reserves around the country, including the Maari field, and any change in ownership of the later company was a "potential concern," Mr Johnson said.

A greater worry to Shell is the volatility of petrol prices and sourcing offshore oil because 85% of crude oil has to be imported.

This week Shell chose to publicly reveal some of its own financial details and industry pricing figures in an attempt to explain fluctuating petrol prices around the country.

Oil prices worldwide have been swinging violently.

Two years ago the oil price sank to $US10 a barrel but has climbed to more than $US30 a barrel recently.

The Organisation of Petroleum Exporting Countries (Opec), has pledged to restore some stability to the market by setting the price of a barrel at $US22 to $US28. The cartel is due to meet next Wednesday to discuss production quotas.

Saudi Arabia, the largest exporter in the cartel, is believed to favour increasing between 500,000 and a million barrels daily to relieve high oil prices.

Shell said coupled with the changing price of oil is the weak New Zealand's dollar, which has a "significant impact on pump prices," the company said.

From 1998 industry figures, Shell made $114 million net income after tax while Fletcher Energy made $49 million, BP $22 million, Caltex $18 million and Mobil $5 million.

Mr Johnson argued the oil industry's combined $185 million net income after tax in 1998 here represented 4% return on the $4.1 billion industry - a much lower return than other capital-intensive industries in this country such as telecommunications and power.

Comments from our readers

No comments yet