A mediation on the offshore pay settlement for the Norwegian continental shelf (NCS) workers started on Thursday, June 30, 2016.

According to the Norwegian Oil and Gas Association (Norsk olje og gass), Thursday and Friday, July 1, have been allocated for this process, with a deadline of midnight on Friday.

About 7,500 employees are covered by the offshore agreements. They work in oil companies, in catering and as drilling personnel in the following enterprises: Statoil, A/S Norske Shell, BP Norge, ESS Support Services, Esso Norge, Sodexo Remote Sites Norway, KCA Deutag Drilling Norge, Talisman Energy Norge, Engie E&P Norge, ConocoPhillips, Wintershall, Coor Offshore, Eni Norge and Lundin Norway.

The Norwegian Union of Industry and Energy Workers (Industri Energi), the Norwegian Union of Energy Workers (Safe) and the Norwegian Organisation of Managers and Executives represent the employees, while Norwegian Oil and Gas Association is negotiating on behalf of the employers.

The employers association said on Thursday that companies covered by the offshore agreements face major cost challenges. With falling oil prices and reduced investment, achieving good profitability in projects has become more difficult on the NCS, the association stated.

“A number of our member companies are in the middle of restructuring processes to meet these challenges. That must be reflected in this year’s agreements on pay and conditions,” the association emphasized.

“We believe the industry must adapt to a lasting lower level of costs while improving its competitiveness in order to preserve as many jobs as possible,” says Jan Hodneland, lead negotiator for Norwegian Oil and Gas.

Investment down

Statistics Norway recently published figures which show that investment on the NCS will fall from NOK 189 billion in 2015 to NOK 166 billion in 2016 and to NOK 153 billion in 2017. That represents a decline of almost 30 per cent from the peak year in 2014.

Persistently low oil prices and a high level of costs are contributing to the reduction in offshore investment and activity.

“We’re seeing a number of examples now which show that more fields will become profitable to develop when costs are cut, even at lower oil prices,” says Hodneland. “That could contribute to increased activity on the NCS.

“In these circumstances, employers and employees have a common responsibility to help safeguard jobs and valuable expertise in an industry which Norway will be needing for a long time to come.”

Consequences of a strike

The association said that, if mediation fails to yield a solution, about 12 per cent of daily oil and gas production on the NCS will be hit.

The Norwegian Organisation of Managers and Executives Safe has given notice that 75 of its members will down tools on the Gjøa platform south-west of Florø, operated by Engie E&P Norge. A controlled production shut-down will be implemented in the event of a strike.

Safe has notified a stoppage by 138 of its members on installations operated by Esso Norge on Balder, Jotun and Ringhorne. These three fields will cease production in the event of a strike.

Industry Energy is to take 524 out of its members at KCA Deutag Drilling Norge, which delivers drilling services to eight Statoil-operated platforms. Plans are being drawn up to secure wells for a possible shut-down if mediation fails. This applies to Oseberg B, C, South and East, Gullfaks A, B and C, and Kvitebjørn. These facilities will continue to produce.

Safe is also taking out 18 members in catering company ESS on three different Esso-operated facilities.

Production affected in the event of a strike

Esso Norge

Balder field, 33 000 barrels of oil equivalent per day (boe/d)

Ringhorne field, 15 000 boe/d

Jotun field, 16 000 boe/d

Engie E&P Norge

Gjøa field, 100 000 boe/d

Wintershall as a result of the Gjøa shutdown

Vega field, 65 000 boe/d