CELEX: 31991M0085
Language: en
Date: 1991-06-13 00:00:00
Title: COMMISSION DECISION of 13.06.1991 declaring a concentration to be compatible with the common market (Case No IV/M.0085 - ELF / OCCIDENTAL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31991M0085

COMMISSION DECISION of 13.06.1991 declaring a concentration to be compatible with the common market (Case No IV/M.0085 - ELF / OCCIDENTAL) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 160 , 20/06/1991 P. 0000

 COMMISSION DECISION of 13.06.1991 declaring a concentration to be compatible with the common market  (Case No IV/M.085 - ELF / OCCIDENTAL) according to Council Regulation (EEC) No 4064/89  (Only the English text is authentic)  The paper version of the decision is available through the sales offices of the Office of Official Publications of  the European Communities. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION Registered with advice of delivery To the notifying party Dear Sirs, Subject:<ind> Case No IV/M085 - ELF/OCCIDENTAL <ind> <ind> <ind> Your notification of 13.05.1991 pursuant to Article 4 of Council Regulation No 4064/89  1.<ind> The proposed concentration consists of the acquisition by E E Petroleum Ltd., an indirect subsidiary of  Société Nationale Elf Aquitaine (SNEA) of all the shares of Occidental Petroleum (Great Britain) Inc. (OPGB).  The company being acquired is a holding company whose assets consist mainly of the shares of Occidental  Petroleum (Caledonia) Ltd. which is incorporated in the United Kingdom.  <ind> After examination of the notification, the Commission has concluded that the notified operation falls  within the scope of Council Regulation No 4064/89 and does not raise serious doubts as to its compatibility with  the common market.  I. CONCENTRATION  2.<ind> Since following the completion of the transaction, OPGB will be a wholly owned subsidiary of E E  Petroleum Ltd., the notified operation constitutes a concentration within the meaning of Article 3(1)b of the  Regulation.  II. COMMUNITY DIMENSION  3.<ind> The operation has a Community dimension. The worldwide turnover of the SNEA group in 1990 was  25.140 million ECU and the corresponding figure for OPGB was 323 million ECU. The SNEA group had a  Community wide turnover of 18.626 million ECU and all of OPGB's turnover was realized in the Community.  The two undertakings did not achieve more than 2/3 of their aggregate  Community wide turnover within one  and the same Member State.  III. COMPATIBILITY WITH THE COMMON MARKET  <ind> Affected Product Markets  4.<ind> The SNEA group is active in three principal business sectors as follows:  <ind> (i)<ind> the exploration, production, refining, marketing and trading of crude oil and natural gas; <ind> (ii)<ind> the production and marketing of basic and specialty chemicals; <ind> (iii)<ind> the research, development, manufacturing and marketing of prescription and non-prescription  drugs, bio-industry products and perfumes.  5.<ind> The undertaking to be acquired is a subsidiary of the Occidental Petroleum Corporation, which is a  major diversified US oil and gas company. OPGB's activities consist of the exploration, production and  marketing of crude oil and gas reserves in the UK sector of the North Sea and in this regard it has interests in  approximately 26 North Sea blocks relating to 8 North Sea fields. OPGB's interest in these blocks, in all but one  case, are shared with a number of other participants. OPGB is the "operator" of six of the eight fields in  question. As operator OPGB is responsible for the actual day to day management and operation of the field in  question subject to the specific terms of the relevant operating agreement among it and the other field  participants.  6.<ind> OPGB also holds a 36.5% interest in the pipeline system which carries or will carry crude oil from five  fields in which it has an interest, as well as from another five fields in which the company has no interest, to the  Flotta terminal in the Orkney Islands where it is received and processed for loading into oil tankers. OPGB also  holds a 36.5% interest in the Flotta terminal itself. SNEA holds no interest in the Flotta terminal or the pipeline  system but has a minor stake in three other crude oil pipelines in the North Sea area.  7.<ind> The product markets in which there will be an increase in market share as a result of the concentration  are therefore the exploration, production and marketing of firstly crude oil and secondly natural gas.  <ind> Crude Oil  8.<ind> Crude oil is usually traded on a worldwide basis. Refiners buy crude oil from around the world  according to availability, price, technical requirements of their refineries and the particular demands of the  market. At the worldwide level, it appears that the proposed concentration will have no impact as the combined  crude oil market share of SNEA and OPGB in terms of production will be less than 1% (0.819% + 0.003%). If  the geographic market is narrowed to the European Community, the crude oil market share is 4.9% for SNEA  and 0.24% for OPGB. If the geographic market is narrowed further to the North Sea, the combined market share  of  the parties is slightly more than 3%. The parties combined market share in crude oil is small regardless of  whether one looks at the product market in terms of production, reserves or acreage, or whether one looks at the  geographic market in terms of the Community, the North Sea or even the United Kingdom.  9.<ind> Furthermore, in practice there is no close vertical relationship between SNEA's production business and  its refining and marketing business. This is due to the fact that oil companies in meeting their refining needs  look to the worldwide crude oil market, rather than merely to their own production, and to the fact that the  decision whether to sell or refine a given amount of their own crude oil production depends on a number of  constantly changing market factors, including current oil prices. This is confirmed by the fact that in 1990  SNEA's total crude oil worldwide production was 23.0 million tonnes and it purchased on the market an  additional 34.2 million tonnes. Of the total (57.2 million tonnes), 17.5 million tonnes were refined by SNEA, of  which only 4.1 million (23%) had come from SNEA's own production. It follows that the vertical relationship  does not present any risk of foreclosure effects for third parties.  <ind> Natural Gas  10.<ind> The physical characteristics of natural gas make it difficult to transport and store. It is necessary  either  to transport natural gas under pressure in pipeline systems which create a continuous physical connection from  producer to consumer, or to freeze it in order to liquefy the gas. Due to the technological complexity and high  cost of liquefication, transport and regasification of LNG, and the consequently limited volume of liquefied  natural gas (LNG) produced, the definition of the relevant geographic market for natural gas depends to a large  extent on the existence of natural gas pipeline systems.  11.<ind> The United Kingdom is largely self-sufficient with most gas supply coming from its sector of the North  Sea although there is also a pipeline connection with the Norwegian sector and Norwegian imports accounted for  13% of UK consumption in 1990. Approximately 25% of the Norwegian natural gas imports sold into the UK  market were produced by SNEA. Since the United Kingdom has no significant pipeline connection with any  other Member State, and imports of LNG are at present only a marginal possibility, it is not excluded that it  could constitute a separate geographic market for natural gas. OPGB's activities are confined to this country  where it had a market share of natural gas production of 0,000071% in 1990. The SNEA group had a market  share in the United Kingdom of 13,9% in 1989 and its estimated market share for 1990 is 10%. It does not hold  a larger market share in any other Member State. The concentration will not alter SNEA's relative position in  terms of North Sea oil and gas reserves. Three large international companies, British Petroleum, Shell and  Exxon have significant market shares of UK natural gas production.  12.<ind> Natural gas contracts are generally of a duration of up to 20 years depending of the life of the field  concerned. The prices agreed in the contracts are normally determined for the entire duration of the contract,  starting at an initial price and subject  thereafter to an indexing formula usually based on the current prices of  other petroleum products. It follows that all of OPGB's current natural gas production in the operating fields is  committed under long term contracts, and will therefore continue to be sold mainly to British Gas after the  concentration.  13.<ind> Neither OPBG nor SNEA is vertically integrated with respect to their natural gas production, with the  limited exception of the SNEA production of natural gas from fields in south west France. Regarding the  conglomerate aspects of the operation, the only product directly related to gas in which SNEA has a substantial  market share is sulphur but the concentration will not have any significant effect on this or any other product  market in which SNEA currently operates.  14.<ind> In view of the parties' position in the crude oil and natural gas markets, and in particular their low  market shares, the concentration will not create or strengthen a dominant position as a result of which effective  competition would be significantly impeded in the common market or in a substantial part of it.  For the above reasons the Commission has decided not to oppose the concentration, and to declare it compatible  with the common market. This decision is adopted in application of Article 6(1)b of Council Regulation No  4064/89.  For the Commission