Statoil ASA (STL), Europe’s second-largest natural-gas supplier, will merge its gas- and oil-trading units as differences in buying and selling the two commodities fade and competition increases.
The Norwegian company plans to combine its gas-trading operations with a liquids division that buys and sells crude, condensate, refined products and gas liquids from May 1, Eldar Saetre, Statoil’s executive vice president for marketing, processing and renewable energy, said in an interview.
“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,” Saetre said. “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.”
Producers such as Statoil are adapting to the demands of European utilities such as RWE AG (RWE) that want to undermine the tradition of linking gas-supply deals to oil prices, a 40-year-old system set up before European gas markets for immediate delivery developed. The practice has led to losses for utilities because gas has become cheaper and the oil price has climbed.
Less than half of wholesale gas in Europe is sold under oil-linked contracts compared with almost all before the 2008 financial crisis and a push by European Union regulators to liberalize continental markets, according to Thierry Bros, an analyst at Societe Generale SA. (GLE).