Statoil, hit by a string of serious accidents lately, had to deal with more bad news on Thursday when its third-quarter financial results showed another steep financial decline despite vigorous cost-cutting. State officials’ biggest concern now is to make sure that Statoil’s cost-cutting isn’t cutting into safety as well.
Statoil was under pressure on many fronts this week, from regulators, labour unions, securities analysts and investors. The company continues to earn less and less, after the fall in oil prices and what the company itself calls “weak markets.” Statoil’s adjusted earnings of USD 636 million were down from USD 2 billion in the same quarter last year.
Analysts had expected that quarterly earnings would fall below a billion dollars, but the actual result was much worse as Statoil continues to be hit hard by low prices and less demand for its two main products, oil and gas.
Eldar Sætre, chief executive of Statoil, also cited “extensive planned maintenance and expensed exploration wells from previous periods.” He claimed, however, that Statoil logged a “strong operational performance” with “strong cost improvements and progress on project execution.”
For Statoil’s own account of its third-quarter results, click here (external link).
It’s the cost-cutting that, while necessary for Statoil’s bottom line and sustainability in a period of lower oil prices, is now setting off safety alarms. Statoil, which has long prided itself on safety both offshore and on land, has suffered four major accidents this month alone including a gas leak at its Sture terminal that sent six people to hospital after they inhaled poisonous hydrogen sulfide. That was followed by three offshore accidents in the same weekend at its Troll field and the Statfjord A and Gullfaks A platforms. There was also a gas leak at Statoil’s Mongstad plant on Monday that forced evacuation of 600 workers.
On Wednesday top Statoil executives had to face officials from the state authority Petroleumstilsynet, which has launched investigations into what went wrong on the specific installations. An even more important question needs to be answered, according to the director of the petroleum authority Anne Myhrvold: Is there any connection between the accidents and the wave of cost-cutting at Statoil?
“We have asked them (Statoil executives) to see whether there are any similarities among the accidents and whether there is a connection between the accidents and the changes taking place within the company,” Myhrvold told news bureau NTB.
She summoned Statoil’s executive vice president Arne Sigve Nylund to an emergency meeting at Petroleumtilsynet’s offices on Wednesday. Nylund is in charge of development and production for Statoil in Norway and he conceded that the accidents never should have happened. “Our job now is to find out the reason for all the incidents we have had recently,” Nylund said.
The reason is urgently needed, said Myhrvold after inspectors from her agency determined that the accidents were serious and could have led to more injury and loss of life. Labour unions representing workers at Statoil facilities have been sounding the alarms for months, with one disappointed that the authorities didn’t shut down offshore installations where there have been problems. “They (Statoil officials) should take a time-out and sit down with employee representatives, the unions and health and safety officials,” said Roy Erling Furre, a deputy leader at the union Safe. “They need to understand the seriousness here.”
Nylund believes Statoil’s management already has “good dialogue and good discussions” with employee representatives, and has had it throughout the cost-cutting process. He admitted there was “some disagreement around individual projects,” but believes Statoil is very aware of the serious nature of recent “incidents.”
Furre strongly disagreed, telling NTB that “central employees within Statoil say there is no real cooperation. They’re politely informed (of looming cuts or changes) but are not included and have no opportunity to influence the result. That can violate laws and regulations and good common sense.”
He also said that reports of other mishaps on board oil platforms “steadily run in” and that Statoil workers “were in the most serious situation we’ve ever been in.” Furre claimed some offshore employees even fear going to work and their families are scared, too, “not just about losing their jobs but about life and health, too.”
Myhrvold of the petroleum authority stressed that “we are investigating the incidents. What we’ve asked Statoil to look into is the total situation. We want answers about any connections to the changes they’re imposing.”
CEO Sætre, meanwhile, showed no signs of easing up on the cost-cutting. He said it was uaktuelt (roughly translated, “out of the question”) to halt management’s “improvement” work. “We must continue to improve, both in efficiency and in safety efforts,” Sætre said after his earnings presentation. He contended that safety was “an integrated portion” of the improvement, and that it was also out of the question that the cost-cutting would come at the expense of safety. “I am convinced that we can do both,” Sætre said.