Northern Might

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The trends toward consolidation and nationalization, in fact, helped drive the Norwegian merger. To a government or national oil company looking for overseas partners to help exploit domestic resources, seeing two Norwegian firms, both largely state-owned, jostling for the same openings could be "confusing," says Mellbye. "They thought there would be some political preference given from the Norwegian authorities and then on that basis they could make a choice," he says. "But that was never done." The two companies began negotiations late last year, and when in December they brought their merger proposal to the government it was quickly approved. (The government owns about two-thirds of StatoilHydro.) Now that the two firms are one, says Mellbye, foreign partners will know that Norway's political support for the company's participation is unconflicted.

The first test of StatoilHydro's newfound unity is playing out in Russia. The company is in talks with Gazprom, Russia's state-owned energy company, about securing a role in developing Shtokman, a vast gas field in the Barents Sea. French rival Total earlier this year secured a partnership role through a share in a specially created company that'll own the project's infrastructure; the remaining 24% stake in that company is still up for grabs.

Still, a united front won't always be enough to eclipse StatoilHydro's biggest rivals. After the megamergers of the late 1990s — such as Exxon with Mobil and BP with Amoco — the Norwegian firm ranks as only the 10th largest in the world in production. StatoilHydro might churn out 1.9 million bbl per day, but that's less than half the daily output of, say, BP.

But what the Norwegian firm lacks in size, it could well make up for in expertise. Many onshore reserves, which are relatively easy to exploit, are being depleted. So Big Oil is being forced offshore into increasingly complex projects, often at great depths and in harsh conditions. "Each barrel of oil produced tomorrow contains a higher degree of R&D than a barrel produced yesterday," Reiten, a former Norwegian Minister for Petroleum and Energy, told TIME a couple of days before his resignation. With StatoilHydro's decades of experience operating in the tricky terrrain and climate off Norway's coast, the company could become the industry specialist at tackling the world's most difficult jobs.

Take Ormen Lange, the name of the deep-sea field 75 miles (120 km) from Nyhamna. Hover over the sea above the enormous gas reservoir and you won't see a rig. Instead, the company overcame under-water peaks, subzero temperatures and powerful currents to build extraction installations directly on the seabed half a mile (1 km) below the surface. In a couple of hours extracted gas reaches the Nyhamna plant, where it's processed and sent to the U.K. via the world's longest underwater pipeline (it's a trip that can take as little as two days). In full swing, the $9.2 billion project will pump up to a fifth of Britain's gas. More than that, though, StatoilHydro's technological muscle on show at Ormen Lange can give it an advantage when bidding for projects in places like the Arctic, says Kjetil Bakken, an analyst at investment bank Fondsfinans in Oslo.

Such skills will come in handy elsewhere, too. The group plans to build on its presence in key deepwater areas from the Gulf of Mexico to Angola, Statoil's largest production site outside Norway. The expected result: while just 14% of the combined firms' output would have been outside Norway in 2006, that figure will rise to 25% in 2009, forecasts Carnegie's Olaisen.

For now, however, the company must also focus on investigating those suspect payments in Libya, and limiting the damage if wrongdoing is uncovered. On Oct. 4, Hydro said it had contacted Okokrim, the Norwegian national authority that investigates economic crime, after an initial probe suggested Hydro had done more business with the consultancy than was previously thought. Packed into a room with reporters in Molde, a short drive and ferry trip from Nyhamna, StatoilHydro's new boss Lund scoffed at any talk that the revelations might disrupt the smooth integration of the two firms. "I'm the strongest guarantor for that," he said, shortly before heading to the Ormen Lange celebrations, "and that is my responsibility." As the head of Norway's new, next-generation energy firm, his responsibilities have only begun.

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