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Suncor Energy Inc. will acquire Petro-Canada in a US$15.5 billion deal that will unite two of Canada's biggest oil companies, the companies announced Monday.

The move is expected to yield savings in operating costs of over CA (nyse: CA - news - people )$300 million (US$244 million) year, and annual capital efficiencies above CA$1 billion (US$812 million), the companies said.

Under the deal, Petro-Canada (nyse: PCZ - news - people ) common shareholders will receive 1.28 common shares of the expanded company for each share of Petro-Canada, while Suncor shareholders will receive new shares on a one-for-one basis.

The share exchange represents a 25 percent premium for Petro-Canada shares, based on a 30-day weighted average of the share price. Based on the closing price Friday, the deal values Petro-Canada at CA$19.12 billion (US$15.5 billion)

Petro-Canada shareholders will hold 40 percent of the enlarged company and Suncor shareholders will hold 60 percent. Both companies are based in Calgary.

Monday's announcement marks the creation of the largest oil and gas company in Canada by market cap, though the merged entity will be smaller than other global heavyweights such as Exxon Mobil (nyse: XOM - news - people ) and ConocoPhillips (nyse: COP - news - people ), which boast market capitalizations of US$326.6 billion and US$55.97 billion respectively.

"This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally," said Rick George, president and chief executive officer of Suncor, who will continue in those roles in the new company.

President-elect's emphasis on the environment means more work for CIOs.

Ed Sperling

Rarely do national political agendas have a direct bearing on CIOs, but next year will be different.

Frank Kelly, Deutsche Bank's (nyse: DB - news - people ) managing director and head of government affairs for the Americas, told the Semiconductor Industry Association Nov. 19 that the Obama administration will look to make swift and deep changes throughout the business world. And while Obama said this is "tech's time," he also said the emphasis will be on everything green.

For many CIOs who believed they could take their time rolling out more energy-efficient changes, including postponing the purchase of new equipment, this should serve as a wake-up call. Here's how things are likely to unfold:

--Pressure will be levied on coal- and oil-fired power generation plants to shift to more environmental-friendly technology. That means new technology, as well as the addition of scrubbers (or, in the case of coal-fired plants, gasification). The problem is this stuff is expensive, which will prompt the utilities--most of which are regulated by their respective states--to apply for rate increases.

While states are likely to approve these increases, they are even more likely to scale them based upon usage. The biggest users will bear the brunt of these changes, and data centers are among the largest consumers of electricity on the planet--and in many cases, the least efficient. That means there will be huge pressure to reduce energy consumption.

--Pressure on companies to cut electricity consumption will mean putting into place long-term plans more quickly, but at a time when budgets are being squeezed by the ongoing economic downturn. The good news is that there will probably be significant tax credits applied to the purchase of more efficient hardware, and a case can be made for sales of virtualization software. The bad news is that no one has the money to speed up these purchases at the moment, which should make for an interesting shuffle of prioritization within corporations.

Ironically, outsourcing is unlikely to reap the same tax benefits, because that's viewed as just handing off the energy problem to someone else. In fact, the numbers may work against software-as-a-service and cloud computing in the short term, because there are no tax benefits. It remains to be seen exactly what benefits will be offered, but this will be an interesting twist to what was viewed as an important cost-cutting trend six months ago.

How are we going to cope with energy prices that are not just high but explosively volatile? It will take a lot of inventive genius. If the world doesn't figure this out it will suffer depressed economies for years to come. It is bad enough that the price of oil doubled from early 2007 to $145 last summer. Now the sudden collapse of that price to $64 makes many an alternative energy project look foolish. Investors aren't going to pour billions of dollars into deep-sea drilling, tar sands mining or solar energy factories if the price of energy keeps falling. But if the funders pull back we'll just be setting ourselves up for another crisis. The International Energy Agency says humanity will consume 700 quadrillion Btu a year by 2030, up 40% from today. (The U.S. consumes 101 quads a year, 86% from carbon fuels.) That's a lot of demand growth for a world trying to wean itself off fossil fuels.

This special issue of Forbes explores both the supply and the demand sides of energy economics. On the supply side we look at biofuel-emitting bacteria, micronukes, smarter grids, clean coal and that perennial favorite of politicians, ethanol. On the demand side we look at hybrid cars, the metal mining that may make hybrids more compelling and a utility chief who wants to get paid to produce fewer watts.

The effort, dubbed RE<C (shorthand for "renewable energy less than coal"), calls for Google to invest in companies developing clean-energy technologies and for Google itself to next year invest tens of millions in research and development in renewable energy.

Technologies created by Google will likely be used by Google, whose data centers are voracious consumers of electricity. The company envisions either selling electricity from renewable sources or licensing technology on terms that would promote broad adoption, according to company founders Larry Page and Sergey Brin.

Its overarching goal is to produce 1 gigawatt of electricity from renewable sources--enough to power the city of San Francisco--faster than the current pace of green-technology development.

"The main crux of this is that we believe that you can do it cheaper than coal...and we want to make it happen now," said Page, Google's president of products. "Most people who are doing this now are trying to do it less expensive than people before, but they are not trying for that goal which will have a significant effect on the world."

Investments in other companies will be funded by Google's philanthropic arm, Google.org, which has about $2 billion worth of Google stock available to it.

In particular, Google will be investing in solar-thermal technology, wind power, and geothermal systems. Its target is to fall below the price of coal power generation, which can be as low as 2.5 cents per kilowatt-hour, said Bill Weihl, Google's green-energy czar.

Google said it's already working with eSolar, a solar-thermal company building systems for utilities to generate electricity from heat. It has invested in Makani Power, which is pursuing electricity generation by harnessing wind at high altitudes.

As part of the effort, Google will be hiring experts in the energy field. It expects to hire 20 to 30 people into its clean-energy division in the next year. More substantial investments will come as energy projects come online, Weihl said.

Although an ambitious plan, Google's impact on the clean-tech market segment in the near term is likely to be more psychological than financial, said Paul Clegg, a senior equity analyst who follows clean tech at Jefferies.

"Tens of millions of dollars is not a small number, obviously, but you're spreading that over things that a lot of other companies are attacking on an individual basis with more money going at it," Clegg said. "I think they'd have to invest a lot more money to get the next Manhattan Project going."

However, Google's initiative is significant in that it could indicate how corporations will start addressing their energy needs and climate change going forward, he said.

A strategic move
The push to mitigate the effects of climate change through clean energy falls squarely into Google.org's missions to improve human health and alleviate poverty, said Larry Brilliant, the executive director of Google.org.

Its foray into the energy business is part of Google's corporate charter to expand into new business areas that are "strategic," according to Brin.

As a large consumer, Google can benefit from cheaper sources of electricity and technologies it successfully develops could generate revenue, he said. In addition, those technologies could potentially bring cheaper sources of electricity to areas of the world that don't have it.

"For economic development to be possible in these areas and for new industries to be spurred along, we want to develop cheap alternatives that are widely available," Brin said. "This isn't just about solving a problem. It also creates a gigantic opportunity."