Norsk Hydro plans exit from petrochems

Norsk Hydro is embarking on an £800million restructuring effort that will see it focus on oil and gas, light metals and agrochemicals, mainly at the expense of its chlorine-based petrochemicals business. Currently, Hydro is a niche producer of PVC and vinyl chloride monomer.

According to Hydro's president and ceo, Egil Myklebust, the changes are an effort to maximise the company's growth potential, with the goal of shareholder returns between 15 and 20 per cent. This process has already begun, with the sale of marginal businesses Pronova Biopolymer, Mabo and Hydro Coatings, which raised NKr2.6billion (£204million), and in oil and gas, with the acquisition of Saga Petroleum earlier in the year.

Myklebust is aiming to increase oil and gas production to 800 000 barrel/day; to consolidate Hydro's position as third-largest aluminium producer in the world and improve its position in magnesium; and to reorganise the fertiliser division - Hydro's original core business - to produce strong returns in what is now a troubled market. The latter goal will mean over 1000 redundancies. `We are building on the three business areas that for decades have given us strength and financial muscle,' says Myklebust. `But they cannot grow at an equal pace at any given time. We must be more consistent and systematic in prioritising opportunities based on potential.'

Petrochemicals are not a core sector for the new Hydro. The business is not large, with 105 000tpa of PVC capacity and 460 000tpa of PVC, based in Germany. Myklebust plans to exit the business through a series of divestments and alliances over the next three years.