Lockout Threatens to Halt Norwegian Oil and Gas Output

July 5, 2012
State-owned energy company Statoil said the lockout will take effect Monday and "will halt all production" on Norway's continental shelf, where about 50 companies operate including BP and Royal Dutch Shell.

Norway's energy industry ordered a lockout next week that threatens to bring production to a halt in Western Europe's largest oil exporter and the world's No. 2 gas supplier.

The lockout was announced almost two weeks into a massive strike by more than 700 North Sea oil workers over pensions which, according to employers' organization OLF, has led to losses worth tens of millions of euros a day.
Crude prices rose on the news, which will halt production in the world's seventh largest oil exporter at a time when global supplies are already being hit by an embargo on Iranian oil.
State-owned energy company Statoil (IW 1000/32) said the lockout will take effect Monday and "will halt all production" on Norway's continental shelf, where about 50 companies operate including oil majors such as BP and Royal Dutch Shell.

Unions Call Action 'Cowardly'

Unions, which launched the strike on June 24, branded the Statoil action "cowardly" and insisted their demands were legitimate.
Analysts said the lockout could push the Norwegian government to step in to try to resolve the dispute, which the OLF said has caused lost revenue of more than 2.0 billion kroner (US$333 million).
"Unfortunately, we see no other course than to notify a lockout," OLF chief negotiator Jan Hodneland said in a statement, maintaining that the strike had led to some 1,000 employees in the supplies industry being laid off and was damaging Norway's reputation as a reliable supplier of oil and gas.
The lockout will mean that 6,515 workers covered by offshore pay agreements will not be permitted to enter their workplaces as of Tuesday, OLF said.
Statoil said it expected a shortfall in production of around 1.2 million barrels of oil equivalent per day.

Lost Revenue Equivalent to $87 Million per Day

"The group's lost revenue resulting from the production stoppage will amount to around 520 million kroner ($87 million) per day," it said.
The strike began after talks broke down over the employers' refusal to back down on a decision to cut a pension add-on introduced in 1998 for workers who retire at 62, three years ahead of the general age for oil workers and five years ahead of Norway's official retirement age.
"OLF and the oil companies are taking advantage of Norway's reputation as a reliable energy supplier to try to stop a legitimate conflict," the SAFE and Industri Energi unions said.
"OLF is speculating that Norway will be seen as an unreliable gas supplier. In that sense, Norway is being held hostage by the halt in gas exports."
The employers' organization brushed aside the criticism.
"Offshore workers rank among the country's best-paid professions ... (and) most of them can also retire at 65. That already makes them Norway's pension winners." Hodneland said

Will Government Intervene?

Analysts quoted by Dow Jones Newswires said the threat of a lockout was prompting speculation that the Norwegian government would step in, noting that the country's $600 billion sovereign wealth fund was entirely dependent on oil revenue.
"I presume the government will intervene because the consequences of a lockout will be so tremendous for Norwegian society," Fondsfinans analyst Morten Lindback said.
However, the government did not appear in a rush to intervene.
"It's a legal conflict and a legal lockout," Jon Evang, an advisor at the energy and petroleum ministry, told AFP.
Statoil said it was planning a "controlled shutdown of production" on the shelf, which would take between one and four days, and that it would transport employees to the mainland starting midnight Monday.
"An appropriate level of safety staffing will be established on each installation," it said.
The last strike in the Norwegian oil and gas sector was in 2004 and lasted a week until the government intervened.
Copyright Agence France-Presse, 2012
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