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Norway Faces Backlash as Oil Supply Disruption Hits Stable Image

July 09, 2012

Norway’s failure to end a strike that risks cutting off all its offshore oil and gas production threatens to “ruin” the country’s reputation as a stable source for energy markets, Nordea Bank AB said.

A shutdown of Norwegian offshore oil and gas production will start at midnight, cutting about 12 percent of Europe’s crude output, unless unions and employers can resolve a two-week strike, or the government intervenes. Neither side has arranged further talks and the government has yet to signal it is willing to intervene to end the strike.

“This kind of conflict definitely ruins the reputation Norway has as a politically stable supplier of oil and gas to the European market, in contrast to very many of the other countries,” Thina Saltvedt, an analyst at Nordea Bank AB in Oslo, said by phone today.

Norway, which isn’t a member of the Organization of Petroleum Exporting Countries, is Europe’s second-biggest oil and natural gas exporter. The government’s failure to resolve the strike by midnight would mark the first time a lockout has gone ahead, after the state successfully forced mediation in similar standoffs in 2004, 2000 and 1997.

“Norway’s reputation as a stable gas producer is clearly being hurt by this and we’re sorry that there hasn’t been a conclusion to the conflict,” Bard Pedersen, a spokesman for Statoil ASA (STL), Norway’s largest energy company, said by phone today.

‘Very Serious’

Workers will be locked out of oil platforms, Bengt Eidem, a spokesman for the Norwegian Oil Industry Association, said today by telephone as the dispute over pensions entered its 16th day. “The situation is of course very serious and we hope that the strike will be over as soon as possible,” he said.

Oil futures rose as much as 0.9 percent after falling 3.2 percent on July 6. Brent crude for August settlement gained 66 cents, or 0.7 percent, to $98.85 a barrel on the London-based ICE Futures Europe exchange. The European benchmark’s premium to WTI was at $13.91 compared with $13.74 on July 6.

“If the only option to solve this is for the government to use some of their tools to end this conflict, we certainly hope that they will do that,” Eidem said. “It seems to be quite difficult to find other options.”

SAFE and Industri Energi, two unions representing the workers, said yesterday the Labor government of Prime Minister Jens Stoltenberg shouldn’t order compulsory arbitration. Should the strike lead to a lockout, it will take producers about four days to shut down production.

‘Bit Crazy’

Norway pumped 1.63 million barrels of oil a day in May, according to the Petroleum Directorate. About 15 percent of the nation’s oil production and 7 percent of gas is already affected, costing the government and companies 3.1 billion kroner in the 16-day strike, according to the Oil Industry Association. The strike is disrupting as much as 250,000 barrels of oil output a day, Statoil said.

The dispute, which began June 24, is the first industry- wide strike by energy workers since 2004 and the longest, according to the SAFE union.

“Norway is a very important exporter to the European market so a lockout will have big consequences,” Saltvedt at Nordea said. “It is a bit crazy, actually. It doesn’t seem like the parties are moving. You never know, there might be a last hour solution to this but at the moment it looks like the parties are still very far from each other. It will be a very interesting day.”

To contact the reporter on this story: Josiane Kremer in Brussels at

To contact the editors responsible for this story: Jonas Bergman at

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