CELEX: 31996M0747
Language: en
Date: 1996-07-25 00:00:00
Title: COMMISSION DECISION of 25/07/1996 declaring a concentration to be compatible with the common market (Case No IV/M.747 - Chevron Corp / British Gas / Nova Corp / NGC Corp) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0747

COMMISSION DECISION of 25/07/1996 declaring a concentration to be compatible with the common market (Case No IV/M.747 - Chevron Corp / British Gas / Nova Corp / NGC Corp) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 360 , 29/11/1996 P. 0003

 COMMISSION DECISION of 25/07/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.747 - Chevron Corp /  British Gas / Nova Corp / NGC Corp) 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 To the notifying parties Dear Sirs, Subject:<ind> Case No.IV/M.747   CHEVRON CORPORATION/BRITISH GAS/NOVA  CORPORATION/NGC CORPORATION <ind> Notification of 24 June 1996 pursuant to Council Regulation (EC) No.  4064/89 1.<ind> On 24 June 1996 Chevron Corporation (USA),  British Gas plc (UK),  NOVA Corporation (Canada) and NGC Corporation (USA) notified to the  Commission an intended operation whereby Chevron, British Gas and NOVA  Corporation acquire within the meaning of article 3(1)b of Council  Regulation 4064/89 joint control of a newly created company (Newco): <ind> <ind> which will itself acquire the natural gas business unit of  Chevron and the business of its subsidiary Warren Petroleum Company  (USA), <ind> <ind> into which the business of NGC will be merged, and <ind> <ind> which will assume the name NGC Corporation. 2<ind> After examination of the notification, the Commission has concluded  that the notified operation falls within the scope of application of  Council Regulation No 4064/89 and does not raise serious doubts as to its  compatibility with the common market and with the functioning of the EEA  Agreement. I<ind> THE PARTIES 3<ind> Chevron is engaged primarily in the exploration for, production of  and supply of crude oil and natural gas;  refining of crude oil;  supply,  distribution and marketing of crude oil, natural gas and refined  products. 4<ind> The principal business of British Gas is the production and supply  within Great Britain of gas and the supply of related products and  services. 5<ind> NOVA supplies natural gas and petrochemicals. 6<ind> NGC is engaged primarily in the acquisition and supply of natural  gas and natural gas liquids. II<ind> THE OPERATION <ind> Introduction 7<ind> The two economic sectors involved in the concentration are the  processing of natural gas, the fractionation of natural gas liquids and  associated activities;  and the marketing of natural gas and natural gas  liquids. 8<ind> Natural gas is obtained from gas or oil wells.  At the processing  stage it can be converted into natural gas for sale as a fuel or the  liquids can be removed and the resulting product fractionated in order to  create chemical feedstock, motor fuels and other products. 9<ind> The objective of the concentration is to merge the US midstream  natural gas activities (ie activities after production up to and including  wholesale marketing) of Chevron with the natural gas business of NGC.   Chevron can thereby withdraw from the daytoday management of a noncore  activity while retaining an interest in a company with much experience in  the sector.  NGC anticipates efficiencies from the concentration.  NGC is  at present jointly controlled by British Gas (35 per cent of the shares)  and NOVA (35 per cent).  The operation therefore involves the creation of  Newco, a concentrative joint venture jointly controlled by Chevron,  British Gas and NOVA which will acquire the relevant activities of  Chevron, into which the activities of NGC will be merged, and which will  assume the name NGC Corporation. <ind> Joint control 10<ind> Chevron, British Gas and Nova will each hold approximately25 per  cent of the shares of Newco.  Under the bylaws of Newco three of the  thirteen directors will be appointed by each of Chevron, British Gas and  Nova and two by managers of NGC;  the remaining two directors will be  independent.  The approval of at least eleven directors is required for  certain decisions, including those relating to oil or gas futures  activities involving an exposure in excess of US$ [Deleted for  publication.  These thresholds are low in comparison with level of  investment needed for (eg) the acquisition of  processing plants,  pipelines and similar assets or the acquisition of a small gas and liquids  marketing company.], expenditure and potential liabilities exceeding US$  [id.] (although decisions relating to expenditure and potential  liabilities between US$ [id.] and US$ [id.] can be delegated to an  executive committee itself appointed by at least 11 directors), the  introduction of a new line of business and the appointment of directors  and senior officers.  The result of this provision is that any one of  Chevron, British Gas or Nova (but no other shareholder) can block any such  decision;  deadlock would therefore occur without their concurrence. 11<ind> Newco will therefore be subject to joint control by Chevron,  British Gas and Nova. <ind> Lasting autonomous economic entity 12<ind> The operation of Newco will consist of activities acquired from  Chevron which Chevron has carried on as business activities distinct from  those which it will retain and in addition all the present activities of  NGC.  It will have sufficient financial and other resources to operate on  a lasting basis.  It will perform the normal functions of a trading  company within a trade market.  Newco will inherit supply contracts  between Chevron and the Chevron businesses acquired by Newco.  These will  largely be transitional, and the amounts involved will in no case exceed  20 per cent of  the supply of the product involved.  The agreements will  be on normal commercial terms.  Newco's shares will be traded on the New  York Stock Exchange. 13<ind> Newco will therefore perform on a lasting basis all the functions  of an autonomous economic entity. <ind> Absence of coordination 14<ind> Since transport costs and adequacy of supply make trade in gas  between North America and Europe insignificant, each gas market in Europe  must be considered as distinct from each gas market in North America.   Apart from British Gas, whose main activities are the exploration for and  production of North Sea gas and the supply of domestic gas in Great  Britain, the notifying parties will have only limited activities in any  market in Europe.  Chevron is active in North Sea gas and oil exploration  and production, but its supply of natural gas in any market in Europe is  insignificant in competition terms.  British Gas [Following the demerger  of British Gas in 1997 the interest of British Gas will be held by the  company conducting the gas trading business.] is the majority partner (51  per cent) with NGC (49 per cent) in Accord, which acts as a trader or  marketmaker in natural gas, buying and selling gas in the United Kingdom  to meet the shortterm requirements of producers and the requirements of  industrial customers.  Chevron thus joins the original ultimate parents of  NGC as the holder of an interest (indirectly c 12 per cent) in Accord.   There is no change in the control of Accord;  indeed British Gas will  reinforce its existing control.  Furthermore there are no proposals for  Chevron to supply Accord, and Chevron does not in any case anticipate  having sufficient capacity available for such shortterm contracts.  If it  did supply Accord it would do so on normal commercial terms. 15<ind> Nor are the North Sea activities of Chevron and British Gas  conducted upstream of the activities of Newco, which are carried on in a  separate geographic market. 16<ind> There is as a result no possibility of coordination of the  activities of Chevron, British Gas, Nova and NGC as a consequence of the  operation. <ind> Conclusion 17<ind> The operation accordingly constitutes a concentration within the  meaning of article 3(1)b of the Regulation. III<ind> CONCENTRATION OF COMMUNITY DIMENSION 18<ind> Chevron, British Gas, Nova and NGC have a combined aggregate  worldwide turnover in excess of 5000 million ECU. Chevron and British Gas  each has a Communitywide turnover in excess of 250 million ECU.  But each  of the parties does not achieve more thantwothirds of its aggregate  Communitywide turnover within one and the same member State. 19<ind> The operation therefore has a Community dimension within the  meaning of article 3(1)(b) of the Regulation. 20<ind> The notification does not qualify for cooperation between the  Commission and the EFTA Surveillance Authority. IV<ind> COMPATIBILITY WITH THE COMMON MARKET 21<ind> The merging businesses are carried on almost exclusively in North  America.  The only activities of Newco in the European Union will consist  of the minority interest formerly held by NGC in Accord and the supply to  members of the Chevron corporate group of administrative support services  formerly supplied by Warren Petroleum. Although Chevron has gas  exploration and production activities in the North Sea which are upstream  from the activities of British Gas in the supply of gas in Great Britain,  its activities in this respect are insignificant.  Accordingly no  competition problems arise. V<ind> CONCLUSION 22<ind> For the foregoing reasons, the proposed concentration does not  raise serious doubts as to its compatibility with the common market and  with the functioning of the EEA Agreement. For the above reasons, the Commission has decided not to oppose the  notified operation and to declare it compatible with the common market and  with the functioning of the EEA Agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No. 4064/89. For the Commission,