Norway's government orders end to oil strike

/ Source: The Associated Press

The Norwegian government Friday ordered an end to a labor dispute involving offshore oil workers that threatened to halt production by the world’s third-biggest oil exporter.

Production was expected to return to normal by the weekend.

The decision came after the national association of oil companies, including Exxon Mobil, Royal Dutch-Shell and state-controlled Statoil, said they would lock out all oil workers who weren’t already on strike next week. The strike began eight days ago in a dispute over pensions and job security.

Such a move, the government said, would cripple the Nordic country’s 3 million barrel a day oil production, along with its exports of crude oil and natural gas.

Instead, the government said it ordered binding arbitration because the strike and lockout would have serious consequences for the nation’s economy and reputation as a reliable supplier of petroleum.

“Such an escalation of the labor conflict would stop nearly all production and have a large economic impact on society,” said Minister of Labor and Social Affairs Dagfinn Hoeybraaten.

The oil industry estimated that a complete shutdown would have resulted in a daily loss of 900 million kroner ($130 million). Norway trails only Saudi Arabia and Russia in exporting oil.

Under Norwegian law, strikers are required to return to work and the employers must call off the planned lockout. A state arbitrator will then settle a new contract because both sides failed to do so.

The union said it would respect the order.

The dispute began last week after the Federation of Norwegian Oil Workers and its smaller ally, Lederene, ordered a strike by 207 workers, and gradually stepped up the number of strikers.

If the government hadn’t stepped in, about 325 oil field workers would have been on strike early next week, cutting Norway’s production capacity by 25 percent.

On Thursday, the Norwegian Oil Industry Association, also known as OLF, responded by calling a lockout for next week that would have stopped virtually all of Norway’s oil production at a time when short supply has kept oil prices high.

Bjoern Tjessem, a spokesman for the federation of unions, criticized the government’s decision, and said it fell for the nightmare economic scenarios painted by the oil companies.

“The government allowed itself to be used by the OLF,” he told The Associated Press. “This does not solve the problem, but at least we have put a focus on pensions and job security.”

The Oil Industry Association welcomed the government intervention.

“I am glad the conflict is now over,” the association’s managing director Per Terje Vold, said in a statement. Earlier, he said impasse between the two sides was hopelessly deadlocked, calling union demands unreasonable.

It was the fourth recent oil field strike, the last being in 2000, that the government ordered stopped, which unions claim unfairly deprives them of the right to strike.

The strike and threatened lockout had a relatively small impact on oil prices, partly because binding arbitration was widely expected.

Fears of a squeeze on oil prices abated earlier this week after Iraq resumed oil exports after sabotaged oil pipelines were repaired.

The August contract for light sweet crude was off 33 cents at $37.60 a barrel in electronic trading ahead of the market opening in New York. Brent crude oil for August delivery was down 31 cents to $34.99 a barrel at midday in London.