BERLIN: The fall in oil prices will increase pressure for consolidation in the oil and gas industries where scale will help companies to win exploration licences or services partners, Dirk Warzecha, chief operating officer of Germany's DEA said.
DEA is due to merge in the first half of 2019 with rival Wintershall following a deal last September between chemicals group BASF and LetterOne, a vehicle of Russian billionaire Mikhail Fridman.
"I expect a consolidation course to continue in the European oil and gas sector after the oil price decline," Warzecha told Reuters at an industry conference.
"We will have more power of enforcement in competition about exploration licences and, naturally, we will also have a stronger position vis-a-vis suppliers," he said, referring to DEA's tie-up with Wintershall.
Brent crude oil prices have fallen by a third since last October, pressured by expectations of a supply glut and fears demand could be hit by a global economic slowdown.
Under the merger, BASF will initially hold 67 percent and LetterOne 33 percent of Wintershall DEA's ordinary shares. Wintershall DEA will seek to list via an initial public offering in the second half of 2020.
The merged group will aim for daily production of 750,000 to 800,000 barrels of oil equivalent between 2021 and 2023 and is expecting synergies of at least 200 million euros ($227 million) per annum as of the third year after the deal closes.
DEA, which has 60 percent gas and 40 percent oil in its portfolio, will continue to spend around 1 billion euros a year in expansion especially in its main overseas markets Norway, Egypt and Mexico, Warzecha said.
Closer to home, he said that DEA's gas activities were likely to benefit as Germany moved closer to abandoning coal-fired power generation over the long-term for environmental reasons.
"We are betting on a stronger usage of gas when nuclear energy and coal-to-power plants are going offline," he said.
Gas has half the carbon dioxide emissions of coal in power plants and supplies half of Germany's home heating infrastructure.