09-03-04 Helge Lund, the new CEO of Statoil, Norway's biggest oil company, said he will pursue a strategy of international expansion as he did at Aker Kvaerner, the oilrig builder he's run since 2002.
Statoil said Lund, 42, will replace Olav Fjell, 52, who quit in September, when Norwegian police began investigating whether the Stavanger-based company paid bribes to win business in Iran and after three years in which Statoil failed to find as much oil and natural gas as it produced. Lund will join Statoil on Aug. 15, the company said.
"If Statoil's going to have any growth, it has to go out" of Norway, said Per Egeland, who manages the equivalent of $ 1.9 bn at Nordea Fondene in Oslo, including shares in Statoil. "There are limited growth opportunities in Norway."

Statoil is betting Lund's experience at Aker Kvaerner will help the company meet a goal of pumping 40 % of its oil and gas abroad by 2012, four times the current level. Expansion is critical as Norway's North Sea reserves begin to decline and Statoil seeks to compete with companies such as France's Total, Europe's third-biggest oil company.
The company's international strategy "won't be changed," Lund said. The bribery investigation had raised investor concerns the company might pull back from its plans.

Statoil gets more than 80 % of its profit from oil and gas production, the industry's most profitable segment. Its proved reserves totalled the equivalent of 4.3 bn barrels of oil at the end of 2003. That compares with 11.4 bn barrels for Total. ExxonMobil, the world's largest investor-owned oil company, had 21.9 bn barrels at the end of 2002.
Last year, Statoil replaced 99 % of its output with new reserves. Norwegian rival Norsk Hydro replaced 215 %, and Total 145 %. BP, Europe's biggest oil producer, replaced 122 % of its reserves in 2003, or 158 % including its new Russian joint venture, TNK-BP.
"Statoil's reserves are too low and its reserve replacement rate is poor," said Lars Marius Furu, an analyst at Handelsbanken Capital Markets in Oslo. "It's a huge problem that there have been no significant petroleum finds in Norway since 1997."

Established by the Norwegian state in 1972, Statoil is 82 % owned by the government and is Norway's largest company. Statoil picked Lund partly because of his foreign business experience, said Chairman Jannik Lindbaek. As CEO of Aker Kvaerner since January 2002, Lund helped expand the company's operations with contracts for projects in countries such as Russia, Angola, Scotland, Australia and in the Adriatic Sea.
In July, the company won a $ 150 mm contract to help develop offshore Russian oil and gas fields owned by Shell and its partners. Before that, it signed a $ 300 mm contract with Total to provide offshore equipment and services at the Dalia project in Angola.

Lund is also credited with helping turn the company around after it almost went bankrupt in 2001. Earlier, Lund presented a plan for Aker Kvaerner to split in three and sell shares for about 2 bn kroner ($ 285 mm) to cut debt after slashing 15 % of Kvaerner's workforce in 2003. With the Norwegian state as Statoil's biggest owner, the company's CEO will need to handle the scrutiny of the media, pressure from politicians and union leaders, in addition to managing the business, a "challenge" Lund said he considered carefully before accepting.
"I was contacted several times over the past months, but I never considered myself a candidate because I was in the middle of an exciting and demanding job," Lund said. "I felt it was a milestone when we announced Kvaerner's reorganization and it was well received, and that made it possible to consider changing jobs."

He declined to comment on recent speculation that Statoil will probably make a bid for Hydro's oil and gas unit. Top management of Statoil and Hydro recently held talks on cooperation that were initiated by Statoil Chairman Lindbaek.
"Lund appears to have successfully turned Aker Kvaerner around. He's shown that he's a good leader of a relatively international company and that he knows the industry," said Nils Hovtun, an analyst at Fondsfinans in Oslo. "It's essential for Statoil to expand in new areas and for Lund to build trust that the company can do this."

Since 2002, Statoil has operated parts of Iran's South Pars project, the world's biggest natural-gas field without oil. Police are investigating whether the company used a $ 15 mm consulting contract to bribe Iranian officials. The US Securities and Exchange Commission began its own probe Sept. 26. Statoil cancelled the contract when the investigation began Sept. 11.
"There are countries where it's virtually impossible to do business without stepping over some ethical boundaries," said Peter Warren, chief investment officer at Euronordic Kapitalforvaltning in Oslo, which manages the equivalent of $ 238 mm. "Companies like Statoil are stuck between a rock and a hard place. If Statoil's competitors are willing to accept different ethical standards, then Statoil loses out."

Lund said it'spossible for Statoil to do business without breaching ethical guidelines. He also said increased investments in technology may help companies such as Statoil extract more oil from Norway's maturing fields, helping growth.
"Lund seems to be very focused on Norway and on developing technology that can help Statoil extract more from its Norwegian fields," Handelsbanken's Furu said. "He may be wanting to tone down Statoil's foreign expansion and focus on the North Sea, where Statoil has a competitive edge."

Statoil has said it plans to spend about 3 bn kroner on exploration this year, of which approximately half will go abroad.
The company expects to drill 8 to 12 wells internationally in 2004.