Norway, the largest producer of oil and gas in Western Europe, was on the brink of a large-scale industry shutdown on Monday that could cause an upturn in world petroleum prices, which lately have been softening because of slack economic demand.
Offshore oil workers have been on strike since June 24, causing the shutdown of some Norwegian fields.
Now the Norwegian Oil Industry Association, which represents the petroleum companies, is threatening a complete lockout of offshore workers beginning Monday night at midnight Norway time.
Already, the strike has cut Norwegian oil production by 15 percent, and gas production 7 percent. If the lockout proceeds, about 6,500 workers would be idled and much of Norway’s oil and gas production would be offline within a few days.
The Norwegian offshore industry produces about 2 million barrels per day of oil, or about 2 percent of world supplies.
Losing that much petroleum output ‘‘adds three or four dollars” to the price of a barrel of oil, “depending on how long it goes,’’ said Stuart Joyner, an analyst at Investec Securities in London.
At least one labor leader was gloomy about the prospects for a settlement before the threatened lockout.
‘‘The North Sea will be shut down completely,’’ said Leif Sande, president of Industri Energi, one of the three unions involved in the dispute. He said it was ‘‘crazy’’ for the oil companies to allow a shutdown that would cost them ‘‘a lot of money.’’
Oil for August delivery rose more than 1 percent, to $85.40 a barrel in midday Monday trading on the New York Mercantile Exchange.
That was up 95 cents from Friday’s close, when the price fell by $2.77 after a gloomy American jobs report and other signs of a weakening global economy.
Prices, though, are still off about 14 percent so far this year. The loss of Norwegian crude is not the only worry of international oil experts, who expect global supplies to tighten as Iranian exports are squeezed by sanctions.
There were reports over the weekend of sabotage on a key pipeline in Nigeria’s Niger Delta. And local militia in Libya, protesting Saturday’s elections, blocked three export terminals responsible for half of the country’s shipments for two days last week.
Whatever the supply and price of oil, though, the far bigger impact of a Norwegian disruption could be on the natural gas market.
Norway produces 10.8 billion cubic feet of gas per day, according to data from the industry association.
That is about 3 percent of the global supply of natural gas.
Within Europe, meanwhile, Norway provides about 26 percent of the region’s natural gas, about the same as the other big supplier, Russia. Britain, Germany and France are among the big consumers of Norwegian gas.
Natural gas on the global spot market gained 3.2 cents early Monday in New York, to $2.808 per 1,000 cubic feet.
With European gas inventories already 8 percent lower than at this time last year, a result of bad winter weather and diversion of some supplies to Asia, “a shut-in of Norwegian gas output has considerable potential to compound an already-tightening European gas market,” says Rob West, analyst at Bernstein Research in London.
One buffering factor could be that, with the economic doldrums in much of Europe, demand for gas is weaker than it might otherwise be.
With the lockout threat, the oil industry seems to be trying to force the Norwegian government to intervene in the dispute, which involves a union proposal for an earlier retirement age and a dispute over pension funding.
So far, the government has shown no inclination to step in, though. “Of course, it will harm Norway’s reputation as a secure energy supplier to Europe,” says Eli Ane Nedreskar, a spokeswoman for the industry association.
“This is important for both the companies and the government.” Norwegian oil production has been in decline, falling from 3.4 million barrels a day in 2001 to about 2 million barrels a day in 2011, according to the BP Statistical Review of World Energy.
Gas output has doubled in that period. But Norway remains by far the largest producer in Western Europe with roughly double Britain’s oil output.
A spokesman for Statoil, which is controlled by the Norwegian government, said that barring a resolution of the strike, the company would begin a controlled shutdown of its platforms on midnight Monday.
It could take up to four days to complete the process, which would affect about 4,500 workers, according to the spokesman, Bard Glad Pedersen. If there is a lockout, Statoil would be the biggest loser among the producers.
The company says it would be out 1.2 million barrels per day of oil equivalent, leading to a revenue loss of about 520 million Norwegian kroner or about $85 million, per day.
Other companies with substantial exposure to Norwegian production relative to their size include France’s Total, Italy’s ENI and Shell.
Olav Fjellsa, a spokesman for the oil giant BP, which operates four fields in Norway, said the company was beginning preparations for a shutdown that would require two days to complete.
Some analysts still expect the government to force a solution either before or soon after the lockdown deadline.
A danger, though, is once a lockout starts positions may harden. ‘‘The risk with a lockout is escalation,’’ said Peter Hutton, an analyst at RBC Capital Markets in London.
The current retirement age for offshore oil workers is 65. The unions want to lower that to 62. Norway’s oil and gas workers are already among the world’s best paid, making an average of $157,000 a year, according to the industry association.
And while offshore laborers work only about 16 weeks a year, they cite tough conditions in their call for an earlier retirement age. Mr. Sande, the labor official, said that the unions have proposed paying the early retirement costs out of $40 million they have already set aside for that purpose.
“What we are asking the employers is to allow us to use our own money to pay pensions,” Mr. Sande said.
Attempts to mediate the dispute have failed, and the government has so far declined to impose a solution, although some analysts doubt that it will permit a long strike.
“It will end in forced arbitration — it always does,” said Bjorn Dingsor, director of Norwegian Energy, a market research firm. “Norway will not put its reputation as a reliable energy producer at risk.” Clifford Krauss contributed reporting from Houston.
nytimes.com
Offshore oil workers have been on strike since June 24, causing the shutdown of some Norwegian fields.
Now the Norwegian Oil Industry Association, which represents the petroleum companies, is threatening a complete lockout of offshore workers beginning Monday night at midnight Norway time.
Already, the strike has cut Norwegian oil production by 15 percent, and gas production 7 percent. If the lockout proceeds, about 6,500 workers would be idled and much of Norway’s oil and gas production would be offline within a few days.
The Norwegian offshore industry produces about 2 million barrels per day of oil, or about 2 percent of world supplies.
Losing that much petroleum output ‘‘adds three or four dollars” to the price of a barrel of oil, “depending on how long it goes,’’ said Stuart Joyner, an analyst at Investec Securities in London.
At least one labor leader was gloomy about the prospects for a settlement before the threatened lockout.
‘‘The North Sea will be shut down completely,’’ said Leif Sande, president of Industri Energi, one of the three unions involved in the dispute. He said it was ‘‘crazy’’ for the oil companies to allow a shutdown that would cost them ‘‘a lot of money.’’
Oil for August delivery rose more than 1 percent, to $85.40 a barrel in midday Monday trading on the New York Mercantile Exchange.
That was up 95 cents from Friday’s close, when the price fell by $2.77 after a gloomy American jobs report and other signs of a weakening global economy.
Prices, though, are still off about 14 percent so far this year. The loss of Norwegian crude is not the only worry of international oil experts, who expect global supplies to tighten as Iranian exports are squeezed by sanctions.
There were reports over the weekend of sabotage on a key pipeline in Nigeria’s Niger Delta. And local militia in Libya, protesting Saturday’s elections, blocked three export terminals responsible for half of the country’s shipments for two days last week.
Whatever the supply and price of oil, though, the far bigger impact of a Norwegian disruption could be on the natural gas market.
Norway produces 10.8 billion cubic feet of gas per day, according to data from the industry association.
That is about 3 percent of the global supply of natural gas.
Within Europe, meanwhile, Norway provides about 26 percent of the region’s natural gas, about the same as the other big supplier, Russia. Britain, Germany and France are among the big consumers of Norwegian gas.
Natural gas on the global spot market gained 3.2 cents early Monday in New York, to $2.808 per 1,000 cubic feet.
With European gas inventories already 8 percent lower than at this time last year, a result of bad winter weather and diversion of some supplies to Asia, “a shut-in of Norwegian gas output has considerable potential to compound an already-tightening European gas market,” says Rob West, analyst at Bernstein Research in London.
One buffering factor could be that, with the economic doldrums in much of Europe, demand for gas is weaker than it might otherwise be.
With the lockout threat, the oil industry seems to be trying to force the Norwegian government to intervene in the dispute, which involves a union proposal for an earlier retirement age and a dispute over pension funding.
So far, the government has shown no inclination to step in, though. “Of course, it will harm Norway’s reputation as a secure energy supplier to Europe,” says Eli Ane Nedreskar, a spokeswoman for the industry association.
“This is important for both the companies and the government.” Norwegian oil production has been in decline, falling from 3.4 million barrels a day in 2001 to about 2 million barrels a day in 2011, according to the BP Statistical Review of World Energy.
Gas output has doubled in that period. But Norway remains by far the largest producer in Western Europe with roughly double Britain’s oil output.
A spokesman for Statoil, which is controlled by the Norwegian government, said that barring a resolution of the strike, the company would begin a controlled shutdown of its platforms on midnight Monday.
It could take up to four days to complete the process, which would affect about 4,500 workers, according to the spokesman, Bard Glad Pedersen. If there is a lockout, Statoil would be the biggest loser among the producers.
The company says it would be out 1.2 million barrels per day of oil equivalent, leading to a revenue loss of about 520 million Norwegian kroner or about $85 million, per day.
Other companies with substantial exposure to Norwegian production relative to their size include France’s Total, Italy’s ENI and Shell.
Olav Fjellsa, a spokesman for the oil giant BP, which operates four fields in Norway, said the company was beginning preparations for a shutdown that would require two days to complete.
Some analysts still expect the government to force a solution either before or soon after the lockdown deadline.
A danger, though, is once a lockout starts positions may harden. ‘‘The risk with a lockout is escalation,’’ said Peter Hutton, an analyst at RBC Capital Markets in London.
The current retirement age for offshore oil workers is 65. The unions want to lower that to 62. Norway’s oil and gas workers are already among the world’s best paid, making an average of $157,000 a year, according to the industry association.
And while offshore laborers work only about 16 weeks a year, they cite tough conditions in their call for an earlier retirement age. Mr. Sande, the labor official, said that the unions have proposed paying the early retirement costs out of $40 million they have already set aside for that purpose.
“What we are asking the employers is to allow us to use our own money to pay pensions,” Mr. Sande said.
Attempts to mediate the dispute have failed, and the government has so far declined to impose a solution, although some analysts doubt that it will permit a long strike.
“It will end in forced arbitration — it always does,” said Bjorn Dingsor, director of Norwegian Energy, a market research firm. “Norway will not put its reputation as a reliable energy producer at risk.” Clifford Krauss contributed reporting from Houston.
nytimes.com
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