Bloomberg News

Norway Shows Oil Strike Ultimatums Won’t Be Tolerated

July 10, 2012

Norway Ends Oil Strike, Averting Lockout of Platform Workers

Shares in Statoil, the Nordic region’s biggest oil company, gained 1.1 percent to 142.4 kroner in the Norwegian capital. Photographer: Kristian Helgesen/Bloomberg

Norway’s government is following a last-minute intervention to halt the country’s longest-ever oil strike with a warning to the industry not to force ultimatums that risk cutting supply.

“I am not impressed by how the employers’ group chose to use the lockout weapon,” Labor Minister Hanne Bjurstroem said in an e-mailed reply to questions today. “It signals that they don’t take the extensive consequences of a complete shutdown of the Norwegian continental shelf seriously. In my view, this is not the best way to deal with a legal labor conflict.”

Norway, which isn’t a member of the Organization of Petroleum Exporting Countries, is Europe’s second-biggest oil and natural gas exporter. Minutes after crossing a midnight deadline that would have triggered a lockout, the government announced its plan to resolve the strike with compulsory arbitration. The move was vital in safeguarding Norway’s reputation as a “stable and predictable supplier of oil and gas,” Bjurstroem said.

The brinkmanship puts at risk Norway’s image as a reliable oil and gas supplier, according to Thina Saltvedt, an energy analyst at Nordea Bank AB.

Conflicts

“What about in the future if you have foreign oil companies that want to invest in the Norwegian continental shelf?” Saltvedt said by phone. “You don’t want to have them doubting that the ministry can actually take care of political conflicts; you don’t want them to be uncertain about the stability of investing in the Norwegian continental shelf.”

Bjurstroem said her department stepped in because a lockout “would have had vital repercussions for the Norwegian economy and also for securing deliveries to Europe.” The result of the compulsory arbitration will be binding.

Brent crude futures for August delivery dropped as much as 2.1 percent to $98.22 a barrel on the ICE Futures Europe exchange and were at $98.93 at 4:07 p.m. London time, compared with $100.32 before the Norwegian government’s intervention. Shares in Statoil ASA (STL), the Nordic region’s biggest oil company, gained 1.6 percent to 143 kroner in the Norwegian capital.

‘Legitimate Right’

The intervention came after the Norwegian Oil Industry Association, which counts Statoil, Total SA (FP) and ConocoPhillips (COP:US) among its members, had threatened to halt all output from midnight yesterday. The move would have cut off about 12 percent of Europe’s crude output.

“We think that we should have a legitimate right to use the tools that are at our disposal,” Jan Hodneland, chief negotiator for the industry association, said in an interview today.

Norwegian oil and gas professionals enjoy the world’s highest salaries, with annual pay checks averaging $180,300 -- more than double the global average, according to a report published by Hays Oil & Gas this year. That compares with annual pay of $124,000 for U.S. workers and $87,100 for British oil professionals, according to the U.K.-listed recruiting group.

The pension dispute, which began on June 24, was the first industry-wide strike by the nation’s energy workers since 2004 and the longest lasting, according to SAFE, one of the three unions involved.

Cornered

The government’s actions show it won’t be cornered by the industry again, Saltvedt at Nordea said. “They wanted to say that next time they have to do this in a different way because you cannot have the situation where they are threatening the Norwegian reputation and threaten the stability of deliveries to Europe,” she said.

Statoil is now preparing to resume production at fields affected by the strike.

“It may take from one to two days to get production started and Statoil expects to have the fields back in full production within a week,” the company said in a statement.

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 was affected before the lockout was called off, the Oil Industry Association said June 27. That’s cost the government and companies 3.1 billion kroner ($508 million) in the 16-day strike, it said.

The offshore dispute centered on a proposal to raise the retirement age, only entitling workers to a full company pension if they stay at work beyond the age of 62. Employers have said they’re abiding by the government’s general pension reforms.

The midnight intervention hasn’t ended all disputes. Workers in Norway’s oil services industry are now considering a strike over pay and will break off talks with employers, Leif Sande, the head of the country’s Energy Industry labor union said today. The likelihood of a strike over pay is “very high,” he said by phone, adding the industry faces “a storm.”.

“To indicate already that you will break off negotiations and strike, that’s a bit much,” Hodneland at the industry association said.

To contact the reporters on this story: Alastair Reed in Oslo at areed12@bloomberg.net; Josiane Kremer in Oslo at jkremer4@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net


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