Oil inquiry may fall under merger rules

Date: 07/03/1996

THE European Commission is expected to begin an inquiry soon into the creation of Europe's second largest oil marketing company under the 1990 Merger Regulation.

Last week, British Petroleum and Mobil announced plans to combine their European operations in the refining and marketing of fuels and lubricants.

If approved by the Commission, the companies would pool assets worth 3.8 billion ecu and create a pan-European venture worth more than 15 billion ecu.

The firms are close to notifying the Commission of their plans and are optimistic the investigation will be carried out under the 1990 regulation rather than under Article 85 of the Treaty of Rome.

The advantage for companies of having an inquiry carried out under the regulation is that an initial decision would have to be given within a month, whether or not the concentration had anti-competitive effects, followed by a four-month inquiry if serious doubts arose.

Cooperative joint ventures, on the other hand, can be investigated under the treaty's key Article 85 enforcing free competition. These inquiries have no time limits.

Deutsche Telekom and France Télécom are familiar with the type of problems an investigation under Article 85 can cause. They announced their 'Atlas' joint venture in July 1994, but it is not expected to be given clearance until July 1996.

In a Green Paper on possible reforms of the merger regulation late last year, Competition Commissioner Karel Van Miert proposed that cooperative joint ventures should benefit from set deadlines of less than five months.

At first glance, the new BP-Mobil venture does not appear to be under threat by the Commission, according to oil analysts.

Throughout Europe, the venture would come second to Royal Dutch-Shell with 12&percent; of the market in fuels and would come top in the lubricants market with 18&percent;.

In France, it would come third in the fuels market with 9&percent;, and have similar market shares in Germany and Spain, while holding a stronger position of 16&percent; in the UK market.

The whole idea of the venture is to allow cost savings by eliminating duplication and achieving economies of scale.

The structure of the deal will be complex, with a series of operating partnerships for fuels and lubricants in each country where they are established as well as for future business. The agreement covers 43 countries including all EU member states.

Local partnerships in each country will operate refineries, depots and retail sites for both companies along with pipelines, terminals, road-tanker fleets, plant and equipment used for manufacturing and distributing oil products in Europe.

BP will operate and hold a 70&percent; stake in the fuels partnerships, which will run the refinery and manufacturing operations of both firms, together with their commercial and retail networks, including 5,600 BP and 3,300 Mobil service stations.

Mobil will operate and have a 51&percent; stake in the lubricants partnerships, managing both brands of lubricants and running the blending plants. Mobil and BP lubricants will be marketed in all service stations.