Norwegian oil and gas output falls as workers go on strike

[July 05, 2022]  By Gwladys Fouche and Nora Buli

OSLO (Reuters) -Norwegian offshore oil and gas workers went on strike over pay on Tuesday, the first day of planned industrial action that could cut the country's gas output by almost a quarter and exacerbate supply shortages in the wake of the Ukraine war.

About 15% of Norway's oil output could also be cut by Saturday, according to a Reuters calculation based on the plans of union members to gradually escalate their action over the coming days.

Oil and gas from Norway, Europe's second-largest energy supplier after Russia, is in high demand as the country is seen as a reliable and predictable supplier, especially with Russia's Nord Stream 1 gas pipeline due to shut from July 11 for 10 days.

The British wholesale gas price for day-ahead delivery leapt nearly 16%, though the price of Brent crude fell as fears of a global recession outweighed supply disruption fears, including the strike in Norway. [O/R]

"The strike has begun," Audun Ingvartsen, the leader of the Lederne trade union said in an interview, adding that the union would escalate the strike to pressure employers to address demands for wage increases to compensate for rising inflation.

THREE-STEP ESCALATION

The Norwegian Labour Ministry reiterated that it was following the dispute closely. The government can intervene to stop any strike in exceptional circumstances.

Union leader Ingvartsen said the escalation was not designed to pressure the government to intervene and impose a settlement, adding that he not been in touch with the government, he said.

"Our goal is that employers engage with us and listen to their employees," he said.

On Tuesday, oil and gas output will be reduced by 89,000 barrels of oil equivalent per day (boepd), of which gas output makes up 27,500 boepd, Norwegian oil and gas company Equinor said.

On Wednesday, the strike will increase gas cuts to a total of 292,000 boepd, or 13% of output, Equinor and the employer's association Norwegian Oil and Gas (NOG) said.

Oil output will be cut by 130,000 barrels per day from Wednesday, they said. That corresponds to about 6.5% of Norway's oil production, according to a Reuters calculation.

Equinor logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

A further planned escalation by Saturday could put almost a quarter of Norway's gas output offline, as well as about 15% of its oil production, according to a Reuters calculation.

NOG has not yet fully analysed the consequences of the escalation planned for Saturday, a spokesman for the lobby group said on Tuesday, adding that it was possible more fields could be affected.

"Consequences of this escalation are not yet clear," Equinor said.

Lederne represents senior offshore workers considered critical to operations and industrial action in one field can have a ripple effect on others which pump oil and gas through the affected field.

MORE FIELDS AT RISK

Industrial action began at midnight local time (2200 GMT) at three fields - Gudrun, Oseberg South and Oseberg East - and will expand to three more - Kristin, Heidrun and Aasta Hansteen - from midnight on Wednesday.

A seventh field, Tyrihans, will also have to shut on Wednesday because its output is processed by Kristin.

By July 9, the Sleipner, Gullfaks A and Gullfaks C fields would also probably have to stop producing due to the strike action in the other fields they pump oil and gas through.

If they were to shut down too, it could cut Norway's output of crude and other oil liquids by another 160,000 boepd and natural gas output by close to 230,000 boepd, according to a Reuters calculation.

Members of the Lederne trade union on Thursday voted down a proposed wage agreement that had been negotiated by companies and union leaders.

Norway's other oil and gas labour unions have accepted the wage deal and will not go on strike.

(Additional reporting by Victoria Klesty; Editing by Kim Coghill, Jason Neely and David Clarke)
 

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