Norway’s oil discovery means more money, more problems

Their offshore oil industry is gushing with good fortune. So why is everyone unhappy?
Oil workers are pictured as they work at the Oseberg oil field, in the North Sea, in this November 25, 2008 file photo. A strike in Norway’s oil sector is delaying the loading of Oseberg crude cargoes in July and preventing the release of an export scheduled for August until production restarts, trading sources said on July 5, 2012. The strike, which entered its second week on Sunday, initially shut down production at the Oseberg and Heidrun fields in the North Sea. REUTERS/Marit Hommedal/NTB Scanpix/Files (NORWAY - Tags: BUSINESS COMMODITIES CIVIL UNREST MARITIME) THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS. NORWAY OUT. NO COMMERCIAL OR EDITORIAL SALES IN NORWAY. NO COMMERCIAL SALES
More money
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Norway, already one of the world’s largest oil producers, scored a coup when it announced it had discovered one of the world’s largest oil finds last year in the North Sea. Elation over the Johan Sverdrup find, estimated to contain nearly 3.3 billion barrels of recoverable oil, was short-lived, however. In what could be a cautionary tale for other oil nations, including Canada, Norway is suddenly grappling with a host of labour and cost troubles linked to its rising success.

A persistent shortage of oil workers has pushed Norwegian wages to the highest in the world. Oil workers now earn an average of $180,300 a year, according to a new survey by Hays Oil & Gas, more than double the global average and $56,000 more than workers in the Alberta oil patch. Drilling in Norwegian waters also costs as much as $75,000 per worker more than in neighbouring U.K. waters, an expert panel commissioned by the Norwegian government wrote in a report last month. That’s mostly due to regulations requiring that offshore oil workers get four weeks off for every two weeks of work. Meanwhile, rules requiring workers to speak Norwegian on rigs are hampering efforts to import workers.

Doing away with many of the perks that offshore oil workers have enjoyed could save the country’s energy sector as much as $167 billion, the panel said. Its chair warned that letting costs escalate could put the future development of Norway’s offshore oil industry in “grave danger.”

With so much wealth and job protection, the country’s oil workers ought to be a happy bunch. Not so. Norway’s oil unions have threatened three strikes this year so far over wage increases and the right to retire with a full pension at age 62, three years younger than the national retirement age. Offshore workers staged a 16-day strike in July that shut down 15 per cent of the country’s oil production. Global crude prices soared above $100 a barrel after Norwegian oil companies threatened a full-scale lockout. The standoff is a lesson in how much influence powerful trade unions can exert on the oil industry. Norway is unique in the size of its unionized workforce, at nearly 55 per cent. But unions also hold sway in Alberta, covering 10 per cent of the natural resource sector, including all Suncor workers. With skilled labour in short supply in Canada, too, any work stoppage could prove highly disruptive.

Norway’s labour troubles have done little to hamper enthusiasm for the country’s offshore oil reserves, however. Oil companies are planning to spend more than $16 billion on new wells next year, a record year. But Leif Sande, shop steward for the oil workers union Industri Energi, says expanding offshore drilling is the last thing Norway needs. Oil workers are already working too much overtime, he says, and rising costs mean less money for upgrades to equipment and infrastructre. “We have to handle the activity in the resources we have control over today,” he says.

The real reason Norway’s oil unions are opposed to more drilling may be that the sheer number of workers needed to tap the vast reserves of deep-sea oil will finally convince the Norwegian government to end many of the protections that have limited the ability to import foreign labour—taking wages down with them.