Odfjell Drilling, one of Norway’s major rig companies serving the oil industry, slashed 20 percent of its workforce on Wednesday as the price of a barrel of North Sea crude dipped below USD 30 for the first time in 12 years. One oil analyst called the latest price fall “dramatic,” and the situation certainly was for those losing their jobs.
Odfjell, based in Bergen, needs to keep cutting costs because there’s simply not enough offshore work to maintain the current workforce. Around 230 offshore workers got the message this week that they’d been made redundant, reported Sysla.no and Dagens Næringsliv (DN).
“This clearly is negative news to get for those affected,” Gisle Johanson, communications chief at Odfjell Drilling told DN. The company currently has had around 1,130 employees in Norway. Only those working on the Norwegian Continental Shelf are affected.
Johanson said the low oil prices have damaged oil companies’ desire to search for more oil, and that cuts demand for Odfjell’s drilling rigs. Odfjell already had been cutting costs and had warned workers that jobs were under threat. “There’s low activity and reduced demand for oil services,” Johanson told DN. He specifically tied the elimination of 230 jobs to a halt in drilling activity on the Brage field, ongoing uncertainty in the industry and the risk of losing contracts for the Island Innovator that Odfjell operates for Lundin oil. The low oil price makes new projects unprofitable.
Oil price chill
Another chill went through the Norwegian economy on Wednesday when the price of Norway’s North Sea Brent crude oil dipped to USD 29.96 Wednesday evening. It was the first time since April 2004 that oil was selling for less than USD 30 a barrel and although it recovered slightly later in the evening, to USD 30.15, the news was not good for Norway’s oil-fueled economy.
“It’s not looking very nice for Norway, this is very brutal for oss,” oil analyst Thina Saltvedt told Norwegian Broadcasting (NRK). “When the oil price is so low, companies have to cut more and more costs and it can be difficult. We are seeing that oil service companies have to cut staffing because the low oil prices influence demand for their services.”
Saltvedt claimed that “no one had dreamed the oil price would go this far down. It’s hitting us, and it will only get worse.”
Not everyone agrees, with both US and Norwegian bankers and analysts noting that oil sold in the range from USD 1o-30 for many years. The past few years of prices over USD 100 have been the exception, not the rule, they claim, and Norway’s central bank chief argued this week that while 2016 will be a tough year, he thinks the economy will turn around next year.
Norway was being advised at a finance conference in Oslo on Wednesday, meanwhile, to concentrate on its export products that currently have high value, for example seafood, which is enjoying strong demand and high prices. Wednesday’s oil price dip was once again linked to large supplies of oil, fears that Iran is about to add more oil to the market and declining demand from China.