THE LONDON TIMES: Need to Know: Global Business Briefing: NATURAL RESOURCES: “Even a small dip in the oil price will prompt takeover activity in the energy sector.”: “In Europe, Shell is the most in need of a deal and interest in BG Group is likely to resurface.” (ShellNews.net) 4 Jan 05

Edited by Neelam Verjee and Joe Bolger

January 04, 2005

The business world looks forward to a year with great expectations

Opec, the oil producers’ cartel, will act to ensure that the price of crude oil does not fall below $30 per barrel, the minimum price that is needed by Saudi Arabia to pay its bills. It will probably settle within the mid-$30 per barrel range, well above the long-term average of the past ten years.

Even a small dip in the oil price will prompt takeover activity in the energy sector. Weakening share prices will encourage bids, mainly in the independent exploration sector with companies such as Cairn Energy, Dana Petroleum and Premier vulnerable to offers. Bidders will be among the larger American independents but state oil companies in Asia, such as China’s PetroChina and CNOOC, may also be tempted. In Europe, Shell is the most in need of a deal and interest in BG Group is likely to resurface.

The battle by Harmony Gold Mining to take over Gold Fields, its bigger South African rival, will come to a head soon. Speculation is mounting that the hostile bid will effectively be turned into a mutually agreeable merger deal, under which the management of Gold Fields will retain a key role and some of Harmony’s lower-value assets will be spun off.  

Bill Gammell, chief executive of Cairn Energy, has repeatedly denied that he is contemplating selling the company’s Indian oil discoveries. Known as an explorer and not a producer, Mr Gammell will this year need to raise £280 million to develop the Mangala field, the first and biggest of five discoveries made on the Rajasthan block.

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