Norway strike escalation to cut 56% of gas exports, nearly fifth of oil output: industry group

A planned strike escalation by Norwegian offshore managers' union Lederne could cut the country's gas exports by 56% and its oil output by 340,000 b/d, or nearly a fifth, from July 9 as a swath of platforms and pipelines are closed, employers' group Norwegian Oil & Gas said July 5.

The warning came as the first phase of the strike, which centers on pay, began overnight July 4-5, with an estimated impact of 89,000 b/d of oil equivalent, of which about a third is gas, amounting to 1% of Norwegian gas production. Additional fields, with greater gas production, are due to shut from the night of July 5-6, followed by the next escalation on July 9 centered on the Gullfaks and Sleipner fields.

In a statement, Norwegian Oil & Gas director general Hildegunn Blindheimm described the strike as "irresponsible," highlighting the crisis already underway in Europe due to tensions with Russia. She estimated Norway accounted for a quarter of European energy supply overall, adding: "Europe is entirely dependent on Norway delivering as a nation at a time when Russian supply cuts have created a very tight market for natural gas."

"A strike on this scale poses huge problems for countries which are wholly dependent on filling up their gas stores ahead of the autumn and winter."

Earlier, state-controlled Equinor confirmed the start of the first strike phase, saying: "Equinor has initiated a safe shutdown of the Gudrun, Oseberg South and Oseberg East fields."

The Oseberg complex is a core constituent in the Platts Dated Brent North Sea crude price benchmark, used around the world, although not all the Oseberg field has been shut down.

Dated Brent was assessed by Platts, part of S&P Global Commodity Insights, at $124.79/b on July 4, remaining well above front-month futures prices.

The escalation on July 5-6 involves the shutdown of the Aasta Hansteen, Heidrun, Kristin and Tyrihans fields, taking the cumulative impact to over 400,000 b/d of oil equivalent, including gas volumes amounting to 264,000 boe/d, or 42 million cu m/d, equivalent to 13% of total gas output.

The July 9 escalation widens the shutdowns to include the Gullfaks A and C facilities, the Sleipner field and a wide range of conjoined facilities. If implemented, oil production of 341,000 b/d and gas exports of 1.12 million boe/d are lost, corresponding to about 56% of total gas exports from the Norwegian continental shelf, Norwegian Oil & Gas said.

Employee standoff

The Lederne, or 'leaders' union, was one of three unions that reached a preliminary pay deal with employers at talks entailing the country's mediation service in June, but its members rejected the deal in a subsequent ballot, it announced June 30.

Norwegian Oil & Gas noted July 5 that settlements had been reached with the two other unions and said Lederne members had the possibility to negotiate additional settlements on a localized basis.

"The association has a parallel agreement with Lederne and the union is fully aware that Norwegian Oil & Gas is unable to make any changes to the agreement with it. It is directly irresponsible to strike when local negotiations to determine pay rates for Lederne's members have yet to take place," the association said.

However, Lederne on its website, referring to the earlier mediation effort, said: "There is dialog between the parties, but so far it has not resulted in concrete results. The mediation result entails a significant reduction in the purchasing power of the Leaders' members, who thus voted down the proposal that came to a referendum."