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Thursday, June 13, 2024

Equinor challenged on several fronts

Norway’s state oil and energy company Equinor has literally had to put out lots of fires this week, just after it had to own up to huge losses on its US operations and shut down its office in Austin, Texas. Equinor’s former CEO who led the company into now-troubled operations, however, is earning more money than ever.

Equinor was evaluating on Wednesday whether it will need to shut down Norway’s huge Johan Sverdrup oil field, just days after the company’s large gas processing facility off Hammerfest was shut down by a fire. PHOTO: Equinor/Arne Reidar Mortensen

In the past few days alone, Equinor has suffered what’s been called “an extremely serious” fire that shut down its gas processing plant on Melkøya off Hammerfest, while also needing to keep an eye on its controversial oil and pipeline operations in Azerbaijan, where bombings and armed conflicts have broken out once again with Armenia over the disputed territory of Nagorno-Karabakh. State broadcaster NRK’s for Russian correspondent noted earlier this week how Equinor oil assets run right through the area where armed battles are taking place.

Closer to home, Equinor was also hit on Wednesday by a strike on its new Johan Sverdrup platform in the North Sea, which generates roughly 12 percent of Norway’s total oil and gas production on a daily basis. More than 40 workers affected by restructuring and new technology face being transferred to a control room on the mainland, but want to hang on to their special offshore benefits.

Their labour union pulled them off the job after oil employers’ organization and lobby group Norsk olje og gas refused to meet the workers’ demands to retain premium offshore pay even when working on land. Their strike raised concerns that production on Johan Sverdrup may need to be shut down. NRK reported that as of midday, the platform was still operating with personnel on board, while Equinor “evaluated” the situation.

‘In a conflict’
“We’re now in a conflict,” Tommy Hansen of Norsk olje og gass told NRK. “It will potentially have dramatic consequences, if it leads to the shutdown of Johan Sverdrup, which is one of our biggest fields.” Any shutdown decision, Hansen said, would have to be taken by Equinor, which saw the value of its shares fall by more than 2 percent on the Oslo Stock Exchange in Wednesday morning trading.

Newspaper Dagens Næringsliv (DN), meanwhile, had already reported last week how Equinor is also shutting down its office in Austin, Texas and terminating hundreds of employees. The office was tied to Equinor’s ill-fated acquisition of Brigham Exploration, part of a major expansion into the US that ended up costing billions. The losses surprised and even angered the government, which still owns 67 percent of Equinor, and investigations are underway.

In trouble in Texas has been exacerbated by how Equinor is handling terminations of US employees and consolidating operations in Houston. DN reported how Equinor isn’t only terminating around 250 employees in Austin, it’s also cutting back on operations on the Bakken field in North Dakota and sold off its Eagle Ford field. Its severance pay offers have sparked irritation among US employees, who claim that low-ranking workers are receiving far less compensation than those who rank higher. That runs counter to how severance pay is handled in Norway, leading to charges of hypocrisy and undue differences between how Equinor operates abroad opposed to at home. An Equinor spokesman claimed that the company tailors compensation levels to the various markets where it operates.

CEOs doing well
Helge Lund, the company’s former CEO when Equinor was still called Statoil, had led the ill-fated expansion into the US, along with other international ventures into places like Azerbaijan, Angola and Brazil. He left the company in 2014 to lead BG Group (British Gas), only to lose his job shortly thereafter when BG was taken over by Shell. Lund received huge severance pay, however, including a so-called “change of control” bonus that along with with his stock benefits has been estimated by DN as being worth more than NOK 370 million. DN reported last week that Lund has also earned NOK 36 million (USD 4 million) in the past two years through his privately owned company Inkerman Holding. He’s also the current chairman of BP.

Lund has since defended his role in the US expansion, as has Equinor’s outgoing CEO now, Eldar Sætre. Sætre, who’s retiring this fall after spending his entire career at Statoil/Equinor, told DN over the weekend that he and his colleagues were taken aback by all the uproar in Norway over the US losses, and how they hadn’t been communicated.

“We have taken this very seriously,” contended Sætre, who’ll also leave Equinor with a handsome retirement package. “Experiencing how upsetting this has been for the public sector, wow, it’s made us take it even more seriously,” he added, citing the political implications “and all the reflections from the outside that come pouring in over you. It has just strengthened the seriousness of the situation,” which will now be inherited by incoming CEO and Statoil/Equinor veteran Anders Opedal. Berglund



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