Suncor Energy Inc. and Petro-Canada are merging to create a $43.3-billion oil and gas giant that executives say will be better positioned to compete globally in a time of economic uncertainty.

The partnership will operate out of Calgary under the Suncor name and will be involved with retail, refining and production activities across Canada. However, Petro-Canada's brand will remain at its various gas stations throughout Canada.

If approved, the partnership will create the largest energy company in Canada and the fifth largest in North America.

"There's a total resource base combined in these two companies -- of undeveloped resources -- that amount to the equivalent of 19 billion barrels of oil," Petro-Canada CEO Ron Brenneman, who will assume the role of Executive Vice Chairman in the merged company, told CTV Newsnet Monday. "That really represents the future of the company."

Under the terms of the deal, Suncor's existing shareholders will own 60 per cent of the company while Petro-Canada shareholders will own 40 per cent.

Suncor CEO Rick George, who will assume the same role with the merged entity, said the focus will be on Canada and the oilsands.

"This will be a very disciplined approach. It will not be scattergun. But it will be a Canadian oilsands-centric type of strategy," George said in a conference call Monday.

John Stephenson, portfolio manager at First Asset Funds Inc., said there is a possibility that some international assets may be sold off.

He also said the deal could result in some layoffs within Canada.

"It will really eliminate some of the overlap in the oilsands in particular and I think that's where the cost-savings will be felt," Stephenson said.

For oilsands projects to be economically viable, analysts say the price of oil needs to be in the US$75 to $100 per barrel range. Crude prices are currently trading around US$50.

The deal values Petro-Canada at $19.18 billion, based on its closing prices on the Toronto Stock Exchange last week.

"Each of us saw the advantage of creating a much more globally-competitive enterprise by putting the two companies together, and certainly size would be an aspect of that," said Brenneman.

"If you think of the scale of the projects and the kind of lead-time required for those projects we were undertaking independently, certainly having deeper pockets as a combined entity makes that a lot easier to fund them."

After Monday's trading, Suncor shares dropped 16 cents to $30.74, but Petro-Canada jumped $6.05 to $35.70.

George said the merger was more than just a strategic fit and that the two companies shared "common ground" with their corporate visions.

"Both Petro-Canada and Suncor have a history of innovation and pushing the frontiers of oil and gas development in Canada. And just as importantly, both companies have taken a leadership position in striving to develop not just resources, but also communities, the Canadian economy and our quality of life."

Company executives say the merger will help them save about $300 million in operating expenditures annually.

The companies also expect to save approximately $1 billion through "elimination of redundant spending and targeting capital budgets to high-return, near term projects."

Earlier this year, the Ontario Teachers Pension Plan, which holds a 3.3 per cent stake in Petro-Canada, took action to try and increase the shareholder value in the company.

Reports say the OTPP was pushing for restructuring at Petro-Canada.

The deal is still subject to regulatory and shareholder approval and is slated to close in the third quarter of 2009.

With files from The Canadian Press