Norwegian oil companies Statoil ASA and Norsk Hydro ASA announced plans Monday to merge their offshore oil and natural gas units in a deal they said would create the world’s largest offshore oil operator.

The Norwegian government, which owns 71 percent of Statoil and 44 percent of Norsk Hydro, reacted positively to the announcement, which sent Hydro shares soaring almost 25 percent. The government would hold 62.5 percent of the merged company.

Statoil is already the key operator on the offshore fields that make Norway the world’s third largest oil exporter, and Norsk Hydro is also a major player.

“The new company will be a highly competent and financially strong Norwegian-based energy champion, well-positioned to ensure continued domestic excellence and pursue international business opportunities for long-term growth,” the two company boards said in a joint statement.

A merged company would have total oil production of 1.9 million barrels per day, and proven oil and natural gas reserves of 6.3 billion barrels, the statement said. The deal requires the approval of shareholders and by government regulatory authorities.

Hydro’s shareholders would hold 32.7 percent and Statoil’s shareholders 67.3 percent of the new company.

Norsk Hydro shares rose 24.8 percent to 195.00 kroner (euro23.95; US$31.34) on the Oslo stock exchange, while Statoil shares gained 3.8 percent to 179.50 kroner (euro22.05; US$28.85).

“This is the start of a new era. We are creating a global energy company,” Norwegian Prime Minister Jens Stoltenberg said. “And the merger is an excellent foundation for meeting the challenges facing the oil and gas industry. The government sees the recommended merger as industrially and strategically well founded.”

Stoltenberg said the government would await further details about the merger, prices and valuations of shares.

“This is a historic milestone. The time is right for one strong Norwegian-based energy champion,” said Helge Lund, president and chief executive of Statoil.

Statoil is based in the western port of Stavanger and employs about 24,000 people in 31 countries. Norsk Hydro, based on the outskirts of Oslo, employs about 33,000 people in 40 countries. It also has a division for production of light metals.

Find More Mining News :