Wintershall DEA May Raise Midstream Issues
The Wintershall-DEA merger announced late September has a number of hurdles to clear before it may go ahead. The two producers have diverse assets but neither is very large in the scheme of things.
Wintershall and DEA are creating "the leading independent European exploration and production company with international operations in core regions," BASF CFO/vice-chair Hans-Ulrich Engel said. Wintershall told NGW September 28 that closing conditions include approvals of merger control authorities in the EU and Mexico, and potentially Argentina; and clearance under foreign investment regulations in Germany and Russia as well as the approvals of several mining authorities and the German federal network agency with respect to Wintershall’s gas transportation business.
But Wintershall has not commented further to NGW whether there may be obstacles in Norway and the UK upstream; or on whether the German pipeline business, owned by Wiga, might have to be sold.
Neither the Norwegian nor UK energy ministries commented directly on the acquisition although Wintershall is present in both. Norway said that so far it had not had any application from Wintershall and therefore would not comment; while the UK does not provide running commentaries on its day-to-day activities.
Wintershall and Gazprom own Wiga roughly equally. Wiga operates as a holding company for the joint transport activities and owns Gascade Gastransport which, in addition to being a substantial German gas transmission operator in its own right, also operates the Opal and NEL gas lines which transport Nord Stream 1 gas and operate independently. Wintershall also has stakes in NS1 and is financially backing NS2 without being a stakeholder in the Russian project.
Germany politically supported the creation of Wiga as a 50-50% venture in 2015, despite the European Commision's policy preference that infrastructure is not controlled by oil and gas producers.
DEA, owned by the oligarch-backed L1, was forced to sell its UK assets by a government worried about security of supply, even though the assets it owned were minor.
L1 faced no such hurdles in Oslo when it acquired DEA in 2015. However three things have happened since: Oslo has dragged its feet over a Norwegian asset swap involving Austrian OMV and Russian state-run Gazprom, while in January 2018 the US Treasury Department has put L1's principle owner Mikhail Fridman on a watch list of 210 political and business allies of Russian president Putin. Fridman has not been targeted with specific sanctions since, but the US Treasury Dept in April 2018 imposed a freeze on the assets of other Russian leaders such as Gazprom CEO Alexei Miller.
It's difficult to read how Oslo will treat the new merged entity. However the chances are that, as Wintershall will remain the majority owner, it may not wish to damage relations with Germany.