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Abu Dhabi, UAEFriday 21 September 2018

Oil strike in Norway shuts Shell field as escalation looms

First walkout in six years threatens to spread and curtail production in the North Sea

It’s the first time since 2012 that a strike in Norway’s oil and gas industry, the country’s main earner, has affected output. Koranyi Balazs / Reuters
It’s the first time since 2012 that a strike in Norway’s oil and gas industry, the country’s main earner, has affected output. Koranyi Balazs / Reuters

A strike curtailed oil production in Norway for the first time in six years, as Royal Dutch Shell shut a North Sea field and workers threatened to escalate labour action at the weekend.

A total of 669 drilling workers walked off the job early on Tuesday when state-backed mediation failed to produce an agreement on wages and pensions, affecting nine mobile rigs and fixed platforms. The action forced Shell to start closing its Knarr field, which produces about 23,000 barrels of oil a day and 3,500 barrels of natural-gas liquids.

It’s the first time since 2012 that a strike in Norway’s oil and gas industry, the country’s main earner, has affected output. Back then, the government stepped in to force an end to the action after 16 days, citing strategic national interests.

Norway is western Europe’s biggest petroleum producer and supplies about a quarter of the European Union’s natural gas, surpassed only by Russia.

The strike comes at a time when oil output is already curbed in key producing countries from Canada to Libya, and impending sanctions on Iran raise the prospect of a global supply crunch. Benchmark Brent crude rose as much as 1.6 percent to US$79.29 (Dh290) a barrel on Tuesday.

The striking workers are employed by companies including Transocean ASA, Odfjell Drilling ASA and Teekay Petrojarl ASA, which runs the production ship at Knarr. The walkout has also affected the Snorre B platform operated by Equinor ASA, Norway’s biggest oil producer, but output is so far normal. The company doesn’t “wish to speculate” about production should the strike escalate, spokesman Eskil Pedersen said.

Demands from the union are “completely unreasonable”, Jakob Korsgaard, the lead negotiator at the Norwegian Shipowners’ Association and head of Maersk Drilling Norway, said in a statement. “The breakdown of the mediation means that the industry, already under heavy pressure, is now being thrust into a devastating conflict that will hurt its reputation, finances and, not the least, jobs.”

The union, called Safe, warned that it will take a further 901 workers off the job on Sunday, affecting installations on fields including Ekofisk, Statfjord, Valhall and Snorre. No additional talks are planned between the parties for the time being, Safe deputy leader Roy Aleksandersen said by phone.

Norway’s biggest oil union, Industry Energy, reached a deal with the Shipowners’ Association on drillers’ wages in May, while a smaller union called DSO reconciled its differences in mediation in June.

The UK part of the North Sea could also see outages later this month due to strikes.

A union announced last week that it would shut down production on three Total SA-operated platforms in a dispute over pay and working hours. The first of five 12-hour and 24-hour stoppages is scheduled to begin on July 23.

Total is confident it can find a “negotiated solution”, Jean-Luc Guiziou, managing director of the company’s UK exploration and production unit, said in a statement. If strikes go ahead, 25,000 to 35,000 barrels a day of crude oil will be taken offline, according to data from the UK Oil & Gas Authority.

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