Norway's Statoil is preparing to shut down production on the Norwegian Continental Shelf (NCS) following a notice of lockout from the Norwegian Oil Industry Association (OLF), the company said Thursday in a statement.
A lockout means a complete shutdown of Norwegian oil and gas production, highly possible government intervention and an end to the strike, which is now running into 12 days.
The decision made by the OLF affects all 6,515 members of Industry Energy, the Organisation of Energy Personnel (SAFE) and the Norwegian Organisation of Managers and Executives (Lederne) who are covered by the offshore pay agreements.
"The conflict is deadlocked and the demands are unreasonable," chief negotiator of the OLF Jan Hodneland said in a statement.
The announced lockout will start on July 9, 2012 at 2400 local time (2200 GMT), and all production on the NCS will be halted, Statoil said.
"Statoil is planning a controlled shutdown of production and return of personnel to land from July 9, 2012 at 2400 [local time]. It will take one to four days to shut all production on the NCS, depending on the characteristics and complexity of each field," Statoil added.
The shutdown on the NCS means that Statoil will have to grapple with a production shortfall of 1.2 million barrels of oil equivalent per day. The group's lost revenue resulting from the production stoppage will amount to around $87 million (NOK 520 million) per day, up an eye-popping $57 million (NOK 340 million) from the OLF's earlier estimate on June 27, 2012.
The striking workers are demanding for an early retirement age for offshore workers at 62 but the OLF has argued that their demands are not in line with government reforms.
"The strike could be a short-term factor supporting Brent prices, but not in the long-term as there are ample crude supplies," IHS Pruvin & Gertz managing director Victor Shum told Rigzone.
The NCS contains 70 oil and gas producing fields sited on the following blocks: The North Sea 56, The Norwegian Sea 13 and The Barents Sea 1. Among the affected fields is the Oseberg field which is critical in the oil market as crude produced from it forms part of the Brent Index. The index represents the average price of trading in the 21-day BFOE (Brent Blend, Forties, Oseberg, Ekofisk) market in the relevant delivery month as reported by industry media.
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