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Europe

Norway intervenes to avert oil industry shutdown

Text by News Wires

Latest update : 2012-07-10

Norway’s government intervened to end a dispute between striking oil workers and employers minutes before a threatened shutdown that would have dealt a serious blow to the country’s image as a reliable oil and gas supplier.

REUTERS - Norway's government ordered on Monday a last-minute settlement in a dispute between striking oil workers and employers in a move to alleviate market fears over a full closure of its oil industry and a steep cut in Europe's supplies.

The strike over pensions had kept crude prices on the boil with analysts expecting far quicker action by the government to stop the oil industry from locking out all offshore staff from their workplaces from midnight (2200 GMT) on Monday.

Oil markets breathed a sigh of relief on news of the intervention and crude prices dropped in early Asian trade.

Under Norwegian law, the government can force the striking workers back to duty and has done so in the past to protect the industry on which much of the country's economy depends.

But it was slow to intervene in the latest dispute, which was in its third week, and did so on Monday only minutes before the start of the lockout, citing potential economic consequences.

"I had to make this decision to protect Norway's vital interests. It wasn't an easy choice, but I had to do it," Labour Minister Hanne Bjurstroem told Reuters after meeting with the trade unions and the Norwegian oil industry association (OLF).

A full closure of output in Norway - the world's No. 8 oil exporter - would have cut off more than 2 million barrels of oil, natural gas liquids (NGL) and condensate per day.

But the minister said her main concern was the potential cut in gas supplies. Norway is the world's second-biggest gas exporter by pipeline, with the majority of supplies going to Britain, the Netherlands France and Germany.

"This could have had serious consequences for the trust in Norway as a credible supplier," she added.

The oil and gas industry makes up about one-fifth of Norway's $417 billion economy.

Leif Sande, leader of the largest labour union Industri Energi, representing more than half of 7,000 offshore workers, said workers would return to work immediately.

"It's very sad. The strike is over," he told journalists.

The dispute has raised eyebrows in Norway, where oil and gas workers are already the world's best paid, raking in an average $180,000 a year. Offshore workers clock 16 weeks a year but cite tough conditions for their call for early retirement at 62.

The oil industry had refused to budge.

"I am very happy that the minister chose to end a conflict that has cost Norway and the oil companies large sums," said Gro Braekken, leader of the OLF.

The OLF said the 16-day strike came at a cost of some 3.1 billion Norwegian crowns ($509 million).

The next step is compulsory arbitration to define a new wage agreement.

"With this decision we can see that whenever the oil industry says jump, the government listens," Hilde Marit Rysst, leader of union SAFE, told Reuters. "We will never leave this issue - it is completely unthinkable to stop fighting for those who are worn out at 62."

She said unions would push their issues at the next suitable opportunity.

Norway is keen to retain its image as a reliable supplier of energy, but analysts have said the Labour-led coalition government was slow to intervene as it faces general elections in a year, and labour unions are important partners.

On Monday, Labour Minister Bjurstroem said she believed the lockout was not necessary and the oil industry will have to take responsibility.

About 10 percent of the 7,000 offshore workers have been on strike since June 24.

Brent crude dropped more than $1 to below $99 per barrel in early Asian trade on Tuesday on news of the intervention, after surging to above $101 on supply fears in the previous session.

The strike had choked off some 13 percent of Norway's oil production and 4 percent of its gas output.

State-controlled Statoil, which operates the affected fields, said it would resume production immediately and would be back at full capacity by the end of the week.

The last lockout in the offshore sector occurred in 1986, shutting down production on the Norwegian continental shelf completely, and lasted for three weeks before the government intervened. In 2004, the centre-conservative government stepped in to avert a lockout.
 

Date created : 2012-07-10

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