Coping with a ‘necessary crisis’

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The steep decline in the price of oil has already cost thousands of jobs in Norway and triggered uncertainty in a once-gushing industry, yet even the head of its national trade association calls the cutbacks “painful but necessary.” Some companies are catching the blame for creating the “oil crisis” themselves, while others are simply coping as best they can.

Some oil industry workers are feeling alone these days after losing their jobs, but their numbers are rising. PHOTO: Statoil/Harald Pettersen

Some oil industry workers are feeling alone these days after losing their jobs, but their numbers are rising. PHOTO: Statoil/Harald Pettersen

Karl Eirik Schjøtt-Pedersen, a former top politician for the Labour Party and chief of staff for ex-Prime Minister Jens Stoltenberg, now runs industry associaiton Norsk olje og gass and is thus charged with promoting its interests. In a recent commentary in newspaper Dagens Næringsliv (DN), he insisted that oil and gas will remain Norway’s most important industry for the foreseeable future and suggested the current trauma might help ensure that future.

He pointed out how investment in the Norwegian oil and gas industry quadrupled from 200 to 2014, and how competition for expertise, labour and equipment drove up prices to record highs. Schjøtt-Pedersen, with the wisdom of hindsight, wrote that too much money was spent and that costs had to come down. The plunge in oil prices has forced that to happen, with most all companies cutting back and making ongoing operations more efficient. Aker Solutions announced hundreds of new job cuts on Tuesday and said more couldn’t be ruled out.

Labour Party veteran Karl-Eirik Schjøtt-Pedersen, a former government minister, is now charged with boosting oil's image and lobbying on the industry's behalf. PHOTO: Norsk olje og gass/Bård Gudim

Karl-Eirik Schjøtt-Pedersen, now charged with boosting oil’s image and lobbying on the industry’s behalf, contends current cutbacks are “painful but necessary.” PHOTO: Norsk olje og gass/Bård Gudim

Such cuts are necessary, Schjøtt-Pedersen has  argued, and likely would have been even without the plunge in oil prices because costs had risen too high. While more than 20,000 people already have lost their jobs in oil and oil supply companies, Schjøtt-Pedersen also noted that the total number of people still working in the business remains higher than it was in 2011. “Many had also complained that the oil and gas sector was hiring so many engineers and skilled workers that there weren’t enough left for other business sectors,” he wrote. Now they probably are.

Meanwhile, the companies and local government officials hit by declining orders and job losses are getting creative in coping with the decidedly new situation after years of record-high affluence. DN reported over the weekend that SR-Bank in Stavanger, sitting with around 250 square meters of empty downtown office space is offering it for free to entrepreneurs keen on starting up new ventures. It’s cooperating with a local business association (Stavanger Næringsforening) and the state agency Innovation Norge on a new program called Nye muligheter (New opportunities) to help hatch new businesses and new jobs.

The mayor of Stavanger, the Norwegian city hit hardest by the oil industry slowdown, has also been hatching new efforts to help get the area out of its downturn and create 10,000 new jobs. Christine Sagen Helgø, who’s also running for re-election, recently gathered some of the most well-known business owners in the area to brainstorm on new products and new services, like one local supplier who’s started making bicycle racks out of the stainless steel formerly used for oil rig equipment. Smed T Kristiansen AS, DN reported, has sold the bike racks to the cities of Kongsberg and Stavanger, and was also presenting them to officials in nearby Sandnes. Company owner Svein Westlund Kristiansen told DN he sees the oil crisis as an opportunity: “We’ve known a downturn would come, but we’ve all been so busy we didn’t have time to develop new ideas.”

Others are also benefiting from the downturn, with some entrepreneurs launching small new oil ventures that can take advantage of lower costs. DN could also report over the weekend that in the middle of the worst oil industry downturn since the 1990s, former oil minister Ola Borten Moe and entrepreneur Erik Haugane managed to raise NOK 1.5 billion for new oil company Okea. Based in Trondheim, it will be on the lookout for oil projects in the North Sea that can be profitable with oil priced at USD 40-50 a barrel.

Some analysts blame the big oil companies themselves for the crisis, because they allowed costs to skyrocket while pumping up so much production that supply outstripped demand. Large producers in the US and Saudi Arabia are catching criticism: “It’s clear that they didn’t pay attention to the huge overcapacity they built up while oil prices were high,” chief analyst at Rystad Energy, Per Magnus Nysveen, told newspaper Aftenposten last week. “With so much production, it was only a question of time before prices had to fall. The companies have killed the oil price themselves.”

The challenge of producing oil off Norway at a profitable level is formidable with prices at current levels, no matter how hard companies like Statoil try to cut costs. That will make the omstilling (restructuring and diversificatin) that politicians are promoting more important than ever, and may enhance prospects that more offshore suppliers will turn to things like bike racks instead. Berglund

  • frenk

    ‘Bicycle racks’……what next?

    • frenk

      …..even these will be ‘outsourced’ to Poland….or welded-up by Polish workers here in Norway……..GO POLSKA!!!!!!!!