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Norwegian drilling strike looms

At a time when contracts are being cancelled and day rates are falling as the market copes with a surplus of product, a pay rise would appear to have been the last possible course of action. Will this strike of more than 1300 Norwegian drillers make a difference?

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The planned strike by more than 1300 Norwegian drillers seems to have had a lot to do with some glaringly obvious negotiating errors, according to the Union of Energy Workers at least. SAFE reported following the failed talks in May that, “The Norwegian Ship-owners’ Association (NSA) didn’t have a dime to offer our members.”

But you could argue the current situation has been caused by SAFE’s mismanagement of expectations. At a time when contracts are being cancelled and day rates are falling as the market copes with a surplus of product, a pay rise would appear to have been the last possible course of action.

In the aftermath of the collapsed talks which centred over wage increases, NSA’s chief negotiator Jakob Korsgaard stated, “Drilling contractors are in a particularly difficult market situation with layoffs and dismissals of employees, both offshore and onshore. At this stage there is no immediate signs for markets improvements and the customers are pushing for cost reductions. “

The action will hit 17 offshore facilities and 22 companies. Some of those affected include Statoil, Transocean, Fred Olsen and AP Moeller-Maersk.
It is hoped arbitration led by the state in the final hours a deal will be reached – after all almost twelve months to the day we found ourselves in the exact same situation and a strike was averted. The industry will want to avoid a repeat of the 2012 strike which lasted for just over two weeks and shut down 13% of Norway’s oil production and 4% of its gas production. That only concluded when the government intervened – when the oil firms raised the spectre of a total lockout.

The union hasn’t said how much more it wants for its members but Reuters reports that other major Norwegian union have secured 2.7% increases on average for their members this year. However the downturn in prices since then means the companies have less wiggle room. Add to that the fact that there are conditions enjoyed by Norwegian workers that would be envied in North Sea installations from single person cabins, fewer day / night rotating shifts, to a better work / leave balance (two on, four off). Solid negotiating by unions has won their members many benefits in the past but how much more can this industry be flogged?

The next steps will be closely watched by the UK unions Unite and the GMB which have recently joined forces to protect offshore workers’ terms and conditions. Their members want a fundamental alteration to their shifts to enable the length of time handovers take to be cut back and also costs. They are also conscious of BP’s plan to move offshore staff to a three on three off rota for the “long term sustainability of the business”.

The unions have threatened strike action, saying recently, “Talks with the Offshore Contractors’ Association ended.. without a satisfactory way forward. We will now proceed to ballot for industrial action and we will provide the employer with the required legal notice in due course.”

Like the Norwegian industry bodies, the UK representative Oil and Gas UK is hopeful of a resolution saying, “the door is still open”. However with the OCA chief executive Bill Murray revealing details of the offer that was rejected, “worth between an extra £1600 and £8000 per annum per individual” and the North Sea experiencing the highest operating costs of any oil producing country in the world (according to the IMF), resolution will not be easily found.