North Sea Oil Services Divers Mull Strike Over Pay

LONDON Oct 19, 2006 (Dow Jones Newswires)

The pressures of work can be bad at the best of times, but for the saturation divers working up to 150 meters under the sea on U.K. oil production facilities, 19.5 times normal atmospheric pressure means uniquely difficult working conditions and the risk of physical damage or even death.

Although safety standards have increased, unions say the pay awarded to divers at oil services and supply companies has fallen 20% below the average U.K. wage in the past 20 years and doesn't reflect the difficult and dangerous nature of the job.

Union representatives meet Thursday to discuss the possibility of a prolonged strike, which they said could cripple oil and gas production and activity in the North Sea at a time when oil services workers are in heavy demand around the world, from an oil industry buoyed by high oil prices and hungry to explore.

Union representatives for about 800 divers employed at U.K. and Norwegian North Sea oil service and supply companies including Halliburton (HAL), Acergy (ACY.OS) and Stolt Nielsen SA (SNI.OS) will discuss the possibility of a strike starting Nov. 1 unless their demands for a 50% pay increase are met.

The U.K.'s National Union of Rail, Maritime & Transport Workers, or RMT, which represents U.K. North Sea oil and gas-diving personnel, said the strike is supported by unions representing Norwegian, Danish, Australian and Argentine divers who also work in the North Sea.

With the approach of winter, the divers' workload is normally diminished, but this year many companies have significant ongoing work, including Royal Dutch Shell PLC (RDSB.LN), BP PLC (BP), Dana Petroleum (DNX.LN) and Oilexco (OIL.LN), which could be delayed.

Stan Herschal, a spokesman for the RMT, said divers' wages have fallen 20% behind the average U.K. wage since 1984. The union has rejected offers from the divers' employers of a 15% increase in wages spread over three years, he said.

"Some people think divers earn a lot of money and if you look at it on a daily basis, it may look that way, but over the year that is not the case," said Derek Moore, a diving representative for the RMT who has been a saturation diver for 30 years.

In a job that the insurance industry considers the seventh most dangerous in the world, divers are expected to pay for their own insurance and training, with the latter costing as much as GBP25,000, the RMT said.

Moore said divers working on offshore oil facilities must deal with the restricted vision and freezing temperatures of the deep sea, and the difficulties of living in a tiny chamber with fellow divers for up to 28 days.

The naturally hostile and unforgiving environment of the North Sea means diver-support vessels often battle to fix themselves in one location, faced with force-eight gales at times. Divers are attached through an umbilical cord to build and repair structures, lay pipelines and carry out inspections.

Over the past 30 years, safety standards have risen, with the level of offshore diving deaths at 39 deaths per 100,000 workers and inshore diving deaths at 29 deaths per 100,000 people in 2004, according to the U.K.'s Health and Safety Executive. The agency added that there have been no offshore deaths so far this year but three nonfatal injuries.

Divers are also treated as part-time employees and are paid for each day of work, the RMT said. Given weather and health factors, divers can only work for a few months, or sometimes even days, each year.

The union said divers have no entitlement to claim for unfair dismissal, sick pay or redundancy under employment laws, and any unplanned disruptions would see their wages reduced. While the top 5% of experienced divers can earn as much as GBP1,000 a day, the RMT said, the average daily wage is closer to GBP400, or between GBP28,800 and GBP46,800 a year according to figures from the Office of National Statistics published in 2002.

Nabil Jalil, the chief executive of Velosi Ltd. (VELO.LN), which provides quality control and assurance services to the oil and gas sector, said: "In my opinion, pay the divers what they want. From my own experience with UT (Ultrasonic Testing) employees, paying them what they want will lead to an influx of labor into the market that will then cause wages to fall."

A spokeswoman at the U.K. Offshore Operators' Association, which represents platform and pipeline operators, said: "Any action by any sector will affect the country's competitiveness globally and damage investment into the U.K. We hope any strike will be avoided."

A spokeswoman at the U.K.'s Department of Trade and Industry said it is "keeping in touch with UKOOA on this and we are hopeful of a positive outcome. It is premature to speculate on costs to the U.K. economy" if the strike goes ahead.

However, analysts are more sanguine on the likely effects of a strike, and say the main impact would be to increase the cost of hire for drilling rigs.

"If divers are out for six months then this could have a minor effect on oil companies, with delays increasing the cost of rig hire," said Richard Rose, oil-sector analyst at Oriel Securities.

Companies bid for rigs on the basis of the number of wells they drill rather than a specified period of time. Rigs are hired at $250,000 a day, with some of the larger ones costing as much as $500,000 a day. Companies must pay daily hiring costs even if rigs are out of action, so a divers' strike could have a more significant impact on medium-sized oil companies than the oil majors because they are less able to cushion the impact of increased costs.

Still, employers remain hopeful that a deal can be struck Thursday and strike action avoided.

Colin Gibson of engineering and construction contractor Subsea 7, who is chairman of a committee of diving industry employers, said: "We meet with renewed hope of making a deal that will avoid any strike." He added, however, that the union's demand for a 50% increase "is unattainable in our lifetime."

Copyright (c) 2006 Dow Jones & Company, Inc.

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