Board to go

April 23, 1999, 20:00 CEST

Statoil chief executive Harald Norvik and his deputy, executive vice president Terje Vareberg, have made their jobs available after it became clear that most of the board of directors will be replaced.

The decision to dismiss the shareholder-elected directors was announced on the evening of 23 April by acting petroleum and energy minister Anne Enger Lahnstein. It will be formally announced at the annual general meeting of the group on 27 April.

The board which has given Statoil's two most senior executives the confidence necessary for exercising their leadership role is being removed.

Underlying these developments are the substantial cost overruns experienced with Statoil's Åsgard project in the Norwegian Sea.

An increase of just over 30 per cent in the overall bill, from NOK 47 billion to NOK 64 billion, prompted the petroleum minister to request an explanation from the Statoil board in March.

Submitted on 7 April, the board's response characterised the cost overruns as "unfortunate" but nevertheless expressed confidence in the work done by Statoil.

Its review of the project noted that fairly substantial technological challenges have been faced, and that the short deadlines set for implementing the work were overly optimistic.

The board also noted that the projects in the Åsgard chain will show a return after tax of eight per cent at an oil price of USD 13.50 per barrel. Few recent projects off Norway can claim such a good return.

After a detailed review of developments in the project, the directors expressed their confidence in Statoil's management.

Subsequently, the petroleum minister - in her capacity as Statoil's general meeting - has made it known that she wishes to replace the board.

"In the circumstances which have arisen as a result of the owner's decision to replace the directors, I have found it appropriate to put my job at the disposal of the board," says Mr Norvik.

"As soon as the new board has been appointed, I will be requesting an interview with its chairman."

He notes that the primary requirement now is to find a solution which takes care of the group's interests. "Statoil also needs a management in these circumstances, and I will accept that responsibility until another solution has been decided."

Mr Vareberg adds that, as the executive with ultimate responsibility for the Åsgard projects for much of the time they have been under way, he finds it appropriate to reach the same conclusion as Mr Norvik.