Norwegian oil workers strike escalates supply fears

The Associated Press

Plans to escalate an offshore oil field strike raised fears that flows from the world’s third-biggest oil exporter could dry up as global demand is holding prices high. An industry executive described the conflict as “completely deadlocked.”

A Norwegian union announced Jan. 23 that it would step up a five-day-old strike early Monday, Jan. 28, which would cut Norway’s daily production by 715,000 barrels and disrupt natural gas supplies to Britain.

Only Saudi Arabia and Russia export more oil than the Nordic country, which has a daily production of three million barrels.

Employers said they were contemplating their options, which many fear could include a lockout that would virtually halt Norwegian production.

However, the Norwegian government has traditionally been quick to order an end to oil-field strikes when oil exports crucial to the economy are threatened.

Crude prices slipped despite news of the worsening labor conflict. Traders said that was partly because many buyers had adopted a wait and see attitude before committing themselves to such expensive oil.

On Jan 21, Iraq, another important oil source, resumed exports after repairs to a pipeline sabotaged by insurgents, helping to cool off prices.

The August contract for light sweet crude was off 60 cents at $37.65 US a barrel in afternoon trading in New York. Brent crude oil for August delivery fell 58 cents to settle at $35.03 per barrel in London.

In a dispute largely over pensions and job security, the Federation of Norwegian Oil Workers and its smaller ally Lederene ordered a strike by 207 workers on Friday, June 18. That has reduced Norwegian oil production by about 375,000 barrels per day. Another 16 workers were ordered to shut down a platform late on Jan. 23, bringing the total loss in production to 455,000 barrels per day, about 15 percent of Norway’s output. The union also said that roughly 100 more members would strike June 28, cutting oil production by another 260,000 barrels per day.

It said the expanded strike would target the Heimdal field, operated by Norsk Hydro ASA, and the production ship Norne, operated by Statoil ASA. The strike has already hit fields operated by Statoil, ConocoPhilips and ExxonMobil.

“The strike situation on the Norwegian continental shelf is extremely serious, it is completely deadlocked, and we are evaluating the situation continuously,” said Per Terje Vold, managing director of the Norwegian Oil Industry Association, said.

Earlier in the day, Tom Gedero, a spokesman for the association, said a lockout was being considered. The association later played down that threat, however.

“At present, we have no plans for a lockout,” Ola Morten Aanestad, another spokesman, said by telephone.

He also said the total impact on production by Monday could be greater than the 715,000 barrels per day now estimated if it also disrupts smaller satellite fields linked to platforms idled by the conflict.

Terje Nustad, leader of the federation of unions, said they wanted to escalate the strike enough to make oil companies feel the economic sting, but not enough for the government to order binding arbitration, which would end the conflict.