Offshore Strike Continues to Escalate, Norwegian Minister of Labor Steps In

Updated: July 10, 2012 (Originally published July 6, 2012)

(Dow Jones) The Norwegian government Friday urged oil unions and companies to continue their negotiations in a bid to resolve a 13-day-old strike that is threatening to escalate next week.

Norway’s Minister of Labor Hanne Bjurstrom called on the employers and labor unions to meet with her Friday after Statoil ASA (STO) and other companies represented by Norway’s Oil Industry Association threatened to lock out workers and shut down production on the Norwegian continental shelf from Tuesday. The oil companies hope the lockout will force an end to the strike that has put upward pressure on oil prices and crimped revenue.

The government has the ability to impose compulsory arbitration, in which case the settlement of the conflict is turned over to a committee called The National Wages Board, but the Minister of Labor instead urged the parties to solve the conflict through continued talks.

Oil companies and three unions representing offshore workers–Safe, Industri Energi and Lederne–have been negotiating on wages but are clashing over employee demands for better pension terms. Positions have now been locked for two weeks, despite the help of third party mediators.

Thus far, a little more than 10% of the 6,500 workers that are covered by the offshore-wage agreement have actually been pulled off the job as a result of the strike, which began June 24. At that level, the strike has slowed the country’s oil output by 240,000 barrels per day, or 15%, and its natural gas output by 11.9 million cubic meters of gas a day, or 7%. It has led to more than 2 billion Norwegian kroner ($334 million) in lost revenue for oil companies.

The lockout–slated to begin at midnight Monday–would affect all of the 50 or so companies with production on the Norwegian continental shelf, including Total SA (TOT), ConocoPhillips (COP), Royal Dutch Shell PLC (RDSB) and BP PLC (BP.LN). Total production of oil and gas on the Norwegian continental shelf is 3.8 million barrels of oil equivalent a day, according to OIA, and the value of the daily production is estimated at NOK1.8 billion.

According to the U.S. Energy Information Administration, Norway was the world’s 14th-largest supplier of oil in 2011, producing about 2.5% of the world’s oil on a daily basis, most of which is tagged for export.

– Christina Zander, Dow Jones Newswires

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