Norway Oil-Wage Talks Near Deadline as 10% of Output at Risk

(Bloomberg) -- Norwegian oil workers will hold last-ditch wage talks with their employers on Friday in an attempt to avoid a strike that could cut 10 percent of crude output from western Europe's largest producer starting this weekend.

A strike by about 150 employees would shut down production at five offshore platforms if a state-backed mediation on Friday doesn't bring a deal by a midnight deadline, Sverre Simen Hov, a spokesman for the Norwegian Organisation of Managers and Executives, said by phone on Tuesday.

A potential strike would start on Sunday -- and not immediately after a failed mediation as is customary -- because of a necessary four-day lag from the union's formal work-stoppage notice, Kolbjorn Andreassen, a spokesman for the Norwegian Oil and Gas Association, which represents the oil companies, said on Wednesday. The employers' group was still collecting information to assess the consequences of a potential strike, he said.

The five platforms -- Statoil ASA's Gudrun, Kvitebjorn and Oseberg Ost, Eni SpA's Goliat and Royal Dutch Shell Plc's Draugen -- produced about 170,000 barrels a day of oil in the first quarter, according to Bloomberg calculations based on the latest available figures from the Norwegian Petroleum Directorate. That amounts to 10 percent of the country's total production in the same period.

The platforms also produced about 25 million cubic meters a day of gas, or 7 percent of the country's total output.

Potential Consequences

Statoil, Norway's biggest oil and gas producer, was still assessing the potential consequences of a strike, spokesman Morten Eek said on Wednesday. A spokeswoman for Shell said communications on the matter would be handled by the industry lobby, while a spokesman for Eni didn't immediately reply to a call seeking comment.

The last time a strike by oil workers affected Norway's production was 2012, when the government eventually used its power to put an end to the industrial action after 16 days. Last year, a strike by workers at oil-service companies shut down operations at 17 drilling rigs, without any reports of an impact on output.

While the oil lobby reached an agreement on wages with Industry Energy, Norway's largest oil-industry union, talks with the smaller managers' union broke down last month. When regular talks break down, Norwegian law requires the parties to make a last effort in a mediation organized by the state. In recent years, mediation has more often than not yielded an agreement, with talks regularly running several hours beyond the deadline.

Partial Recovery

The risk of a strike comes just as Norway's oil industry is reeling from a collapse in commodity prices since 2014. Investments are expected to fall for a third consecutive year, and about 50,000 people have lost their jobs in the industry in the current slump. Still, a partial recovery in oil prices and drastic cost cuts that have improved profitability have breathed new optimism into the industry. Statoil expects to raise spending for the first time in three years in 2017, and has approved a series of new projects in Norway despite the downturn.

The managers' union, which represents about 13 percent of employees covered by the platform-worker agreement, or almost 1,000 people, said the employers' wage offer would reduce their purchasing power for a third consecutive year.

“We've contributed to strong moderation and cooperation in times of crisis through several years,” Audun Ingvartsen, the head of the managers' union, said when regular talks broke down in May. “We can't accept a wage drop for our members now that the arrows are turning.”

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net.

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Stephen Treloar