Oil futures dropped by close to $2/b in early trading Tuesday after the Norwegian government intervened at the 11th hour to block a full lockout of offshore workers, staving off a total shutdown of Norway's oil and gas production.
Norway's unions and its oil producers' association, the OLF, are now set to enter a period of "compulsory arbitration" to resolve their pensions dispute that had threatened to close down the country's mainstay industry.
As a result of the government intervention, operations will resume on the fields that had been shut in by the initial two-week strike.
State-controlled Statoil had shut in some 240,000 b/d of oil output and 12 million cubic meters/day of gas production because of the industrial action.
Statoil late Monday said it expects to have its fields offshore Norway back to full production "within a week" following the government's intervention.
In a statement, the company said it was "preparing to resume production at installations that have been affected by a strike, after the government decided to impose compulsory arbitration in the pay settlement for the Norwegian Continental Shelf."
It also confirmed that the labor dispute would be resolved by compulsory arbitration, something the government will propose to Parliament.
"At the request of the minister [Labor Minister Hanne Bjurstroem], the parties are to resume work as soon as possible. The lockout that has been announced for the Norwegian Continental Shelf will therefore not come into force," Statoil said.
The company said the fields that were affected by the labor dispute were the Oseberg Field Center, Oseberg South, Oseberg East, Oseberg C, Heidrun, Huldra, Veslefrikk and Brage.
"Production from these installations will be resumed as quickly as possible. It may take from one to two days to get production started and Statoil expects to have the fields back in full production within a week," it said.
'RELIEVED'
The OLF said it was relieved that Oslo intervened to prevent a full shutdown.
"It is a responsible choice made by the government tonight," its chief negotiator Jan Hodneland said in a statement.
He said the strike lasted for 16 days and cost Norway a total of NOK3.1 billion ($510 million).
"We are now relieved that we do not have to shut down the production on the Norwegian Continental Shelf," Hodneland said.
"However, we were ready to initiate a lockout if the government had not intervened," he said.
Bjurstrom, announcing the intervention, emphasized the country's role as a reliable oil and gas exporter as one of the reasons for her decision to intervene.
"We have a key role as a supplier of gas -- and also oil -- to Europe," she said. "We cannot undermine the confidence in Norway as a stable supplier."
She also expressed frustration over the lockout plan.
"The industry's choice to use lockout was totally irresponsible," the minister said. "I had to stop the process. When neither the industry nor the trade unions were able -- or willing -- to take responsibility for finding a solution, I was left with no alternative but to take the responsibility."
Leif Sande, leader of the largest trade union, Industri Energi, was not happy with the outcome. "The minister has let us down," he said, adding that the government led by the Labor Party had undermined the trade unions' right to go on strike.
