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Statoil eyes hydro production

Statoil could acquire hydro production in Norway as part of its diversification strategy, according to the company's Nordic energy director, Auke Lont.

To compensate for a declining oil market, Statoil has started to supply electricity to domestic consumers as part of a multi-utility service that it supplies from its network of petrol stations.

Lont has suggested that Statoil, Norway’s state oil and gas firm, may venture into power production with the acquisition of an existing hydro plant.

“It has more financial resources than any other company in this country to purchase generation capacity, and hydro plants are cheap now because prices have been so low,” said Jørn Høistad, an energy economist at Norplan. “Statoil can certainly acquire a lot of hydro capacity in Scandinavia, if they really decide to put their resources there,” he added.

A conflicting outlook for Statoil’s potential in the hydro market has been put forward by the Norway Electricity Association. “If they want to enter the hydro production industry by buying or setting up plants, it will be up to the authorities,” says a spokesman. “Norway has very tight regulations governing the ownership of generation assets. Most hydro plants are owned by central government or by local communities. An existing owner cannot sell more than 30% of the shares in a plant without offering the same stake to the state.”

The Norwegian government intends to keep all of the country’s hydro capacity in Norwegian hands. It could buy back stakes in hydro plants through Statoil, as it is currently a state-owned company, but it is highly likely that it will be privatised in the near future.