Helge Lund, the CEO of Statoil, will shortly become one of the most highly paid oil company chief executives after BG Group offered him the role. In his new role with BG — a far smaller company than Statoil — Mr Lund will potentially earn ten times his previous salary, managing a business with operational revenues that are just 20pc of Statoil’s Norwegian oil and gas business.
The 52-year-old CEO avoided discussing pay when contacted for comment by the Financial Times after the news about his appointment went public, saying that he had never discussed pay during his ten years at Statoil and had no intention of doing so now. Instead, he explained that he felt it was the right time to move to allow a fresh start for him personally and for Statoil.
Mr Lund will be in a position to earn as much as £14 million annually within his new role at BG. He will receive a £1.5 million base salary, with a short-term bonus worth between 100pc and 200pc of that amount, and with a long-term programme of incentive payments made annually with a face value pegged at 600pc of his base salary. Additional bonuses include a 30pc cash payment as an alternative to a traditional payment, along with a sum to facilitate his location worth £480,000.
The stock market put a value of around $4 billion on Mr Lund’s new appointment, predicated on the increase in BG Group’s market cap and the drop in Statoil’s after the initial announcement. A BG spokesperson, however, said that the reward level was more likely to be c. £9.5 million if the new CEO achieved his targets. The package was defended as being in line with the average packages received for global gas and oil businesses. BP’s CEO, Bob Dudley, received a package of over $13 million in 2013, and Royal Dutch Shell’s CEO, Peter Voser, earned just slightly less at $11 million.
BG’s Executive Chairman, Andrew Gould, also defended the salary package details, saying that the group needed to benefit from a proven leader in the industry who would be able to develop and deliver the opportunities available.
However, Mr Lund will not inherit an easy role. The oil industry is facing broad challenges, with a recent four-year low seen for crude oil prices and concerns around rising costs and sector investment, ageing infrastructure, health and safety and supportive government policy, among others.
Statoil’s Chairman, Svein Rennemo, said that Statoil had benefited from Mr Lund’s leadership expertise at a markedly lesser price than BG would be prepared to pay. As an interim measure, Eldar Saetre will be taking up the CEO position on a temporary basis while the board looks for a permanent replacement both within its internal employee base and in the external jobs market. Mr Saetre has had a long and successful career at Statoil as one of its oil executives.
Statoil also announced plans to cut capital spending earlier this year in a bid to manage operational costs, drive forward greater efficiencies and to deliver greater stakeholder value in the longer term.