Norwegian oil workers threaten to escalate strike

Associated Press

June 23, 2004

OSLO, Norway -- Oil workers threatened to expand a strike by setting a midnight deadline for shutting down another offshore platform today, while employers considered retaliating with a crippling lockout on all platforms.

A lockout could shut down virtually all petroleum production from the world's third largest oil exporter.

However, in the past, the government has quickly ordered strikers back to work when a conflict disables the 3 million barrel per day oil production that is crucial to the economy of this Nordic country.

The strike comes amid high oil prices due partly to short supplies. Only Saudi Arabia and Russia export more oil than Norway. Oil prices edged higher today as traders await the outcome of the conflict.

Terje Nustad, leader of the striking Federation of Norwegian Oil Workers, said the strike would be expanded beginning midnight Wednesday unless a settlement was reached.

The union ordered 207 workers to strike this past Friday after state-led mediation failed in a dispute over pensions and job security. That has reduced Norwegian oil production by about 375,000 barrels per day.

Another 16 union members were to join the strike at midnight Wednesday, shutting down another platform and bringing total lost production to 455,000 barrels per day, or about 15 percent of Norway's production.

A union statement said 97 more workers at two offshore units would be ordered to strike at midnight Sunday, which would cut oil production by another 260,000 barrels per day.

It said the expanded strike would target the Heimdal field, operated by Norsk Hydro ASA, and the production ship Norne, operated by Statoil ASA.

The strike has already hit fields operated by Statoil, ConocoPhilips and Exxon Mobil.

Tom Gedero, of the Norwegian Oil Industry Association, said oil companies were considering whether to respond with a lockout at platforms not affected by the strike, possibly shutting down all production.

"The situation is serious and it is getting even more serious" because of the union's decision to escalate, Gedero told Dow Jones Newswires.

In a similar strike in 2000, the government ordered binding arbitration, forcing strikers back to work when the oil association announced plans for a lockout.

Labor and Social Affairs Minister Dagfinn Hoeybraaten, who could order binding arbitration, said it was too early and the conflict was still too limited to take such a step.

"It is worrisome that the conflict is being stepped up," he said on the state radio network NRK. "The authorities are following the conflict on the North Sea oil platforms continuously."

Oil prices were higher. The August contract for light sweet crude was up 8 cents at $38.33 a barrel in morning trading in New York. Brent crude oil for August delivery was up 12 cents at $35.73 per barrel in afternoon trading in London.

Oeyind Munthe-Kaas, of Norwegian Oil Trading, said prices had not increased more because the market is awaiting the outcome of the conflict.

"Few want to buy at that price and then risk a settlement" that could cause prices to fall, the trader said.

He also said that since the new cuts don't reach full force until Sunday, others are waiting to see if there is a settlement or if the government orders binding arbitration in the meantime.

Munthe-Kaas said if the conflict causes cuts that are over about 1 million barrels per day, then a back to work order would be likely.