NEWS

The Norwegian government on July 9 forced an end to a 16-day strike by
offshore production workers after companies threatened to shut down all output
in a move that would have cut off Norway’s top source of tax revenues.

The new round of negotiations affects more than 4,000 managers,
administrative staff and service workers, some of whom are vital to operations
of pipelines and other infrastructure for the world’s eighth-largest oil
exporter and Europe’s second-largest gas exporter.

Many of these employees are demanding the right to retirement at 62 on a full
pension, just as offshore workers did, while the Norwegian Oil Industry
Association (OLF) has refused to even discuss the issue.

Top producer Statoil triggered the conflict when it withdrew an existing
retirement plan, arguing that employees should work beyond 62 years of age
before earning a full pension, while keeping it unchanged for top
management.

“If there is a conflict between us and the industry regarding administrative
staff onshore or offshore, we could in principle arrive at exactly the same
situation as we saw during the oil workers’ strike,” Industri Energi union
leader Leif Sande told Reuters.

“For instance, if we launch a strike at the Sture terminal, it would cut off
the Oseberg field,” he added.

Oseberg is part of the North Sea dated Brent benchmark used as the basis for
many of the world’s trades and feeds oil to the Sture export facility.

SAFE union leader Hilde Marit Rysst, who represents onshore workers at a
string of plants such as Statoil’s Snoehvit LNG facility and the Sture crude
export terminal, said her members were hoping to reach a deal and avoid a
strike.

“But if these negotiations end in conflict, we can take out very few workers
and still cause extreme consequences,” Rysst said.

The employers also fear that the forthcoming round of talks could lead to
conflict.

“I think these negotiations are going to be uphill,” OLF chief negotiator Jan
Hodneland at the OLF said. “It might be difficult.”

In addition to oil company workers, there will be separate talks on behalf of
employees of service firms that provide exploration drilling and other tasks
that production companies choose to outsource. These talks will be over wages
and will not include the pension issue.

Any action by these workers could idle expensive equipment such as drilling
rigs and potentially delay the start of future production of oil and gas but
would not directly hit current output.

“A strike here could go on for a long time before any production stops,”
Sande of Industri Energi said.

STRONG ECONOMY LIFTS CONFIDENCE

The main negotiations are expected to take place in August or September. In a
related move, however, Sande’s union warned on Friday that 159 employees of
service contractor KCA Deutag could go on strike from July 27, affecting
drilling operations at Exxon Mobil’s Ringhorne field and Statoil’s
Kvitebjoern.

Norway produces 2 million barrels per day of oil, natural gas liquids and
condensate, while its natural gas operations pump 1.8 million barrels of oil
equivalent per day, according to the OLF.

The country’s strong growth and unemployment of just 3 percent has given
workers the confidence to set high demands, said Gudmund Hernes, a former Labour
government minister and now a professor at the Fafo Institute for Labour and
Social Research.

“The economy is very healthy and we have low unemployment, making the
workers’ positions stronger than if they had to compete for jobs like they have
to in some European countries, where unemployment may be as high as 20 percent,”
Hernes said.

“In the case of the oil strike, managers decided to cut workers’ pensions
while keeping their own. This is a main reason why this strike became so
serious. In Norway this will not work in the long run,” he added.

While the strike that began in June cut oil output by 13 percent and natural
gas by 4 percent, the government didn’t intervene until all output was at
risk.

The government has the right to end strikes if it believes safety or vital
national interests are at stake, though there is an ongoing debate regarding
where the legitimate point of intervention lies.

Under Norway’s highly regulated labour relations, the production workers that
were on strike in June and July will have their demands settled by a neutral
commission and are banned from striking for two years.