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Shell Oil Workers in North Sea Threaten to Strike

LONDON — As energy prices start to rebound, a group of workers in the North Sea are gearing up for a strike, saying the industrywide cuts have been too deep.

The labor action, by unions representing about 400 maintenance workers on seven oil production platforms operated by , is part of the broad struggle to find a new equilibrium.

“Pressure is mounting not just in the North Sea but in many different regions for producers to start spending as oil prices rise,” said Richard Mallinson, an analyst at Energy Aspects, a London-based research firm.

When oil prices soared to more than $100 a barrel, costs followed. Oil companies spent heavily to ramp up production and invested heavily in big, expensive projects.

The drop in prices naturally prompted a sharp pull back. Oswald Clint, an analyst at Bernstein Research in London, estimates that the industry has cut operating costs by about 45 percent in the United States, and 20 percent elsewhere.

So far, contract workers like the ones threatening the strike have borne the brunt of the pain, in terms of layoffs and pay cuts. Their employers, largely service providers, have seen a significant reduction in what they can charge the operators like Shell for drilling, laying pipe, painting platforms, and just about everything else.

The looming strike in the North Sea — along with the other recent signs of strife among oil service companies — may mean that it will be hard to squeeze out further savings. And rising prices, now around $45 a barrel, give producers less cover for passing on the pain.

The labor unions in the North Sea have said their members won’t work overtime on Monday, and will begin a full-fledged 24-hour stoppage on Tuesday. The job actions, which the unions plan to continue over the coming weeks, are not expected to lead to reduced production, at least in the early stages.

“We understand there is a downturn in the North Sea,” said John Boland, an official of Unite, which is helping to organize the strike. “But the level of cuts being proposed are too much.”

Signs of labor unrest have been bubbling up in recent months.

In late June, oil workers in Argentina took action, demanding higher pay. A strike by Norwegian oil workers over pay and more flexible work practices was narrowly averted this month. In April, a brief work stoppage by Kuwaiti oil workers sharply cut the country’s production.

Oil service providers are also hoping for some relief.

Paal Kibsgaard, the chief executive of , one of the world’s largest oilfield services companies, told analysts on Friday that prices had reached the “bottom of the cycle.” He said that Schlumberger was now “looking to recover the temporary pricing concessions we have made or to renegotiate those contracts which at present show no promise of becoming financially viable.”

As a high cost, mature region, Britain’s North Sea has been hit particularly hard by the slowdown. Over the last two years, the work force directly employed by the industry has fallen by nearly 8,000 to 34,000, while another 50,000 indirect jobs have been lost.

Some of the remaining workers have already been forced to accept reduced pay or changes to their rotations. For instance, they may be required to stay at sea for three consecutive weeks, instead of two, a shift that saves money in helicopter flights and other costs.

“It is clear that in order for the North Sea oil and gas industry to remain competitive in the lower oil price environment, structural change is needed,” Shell said in a statement, calling the planned strike “highly regrettable.”

The workers planning to strike on Tuesday are employed by Wood Group, a large oil services company based in Aberdeen, Scotland. Wood Group then contracts them to Shell, which has considerable leverage over the people employed.

The unions say that a new contract proposal will, in effect, cut pay as much as 30 percent. Wood Group puts the average at 3 percent.

But the job actions may not hurt Shell much, at least in the short term. The people involved, Shell says, are maintenance workers, not crucial operating personnel.

Shell has already said that it has its entire portfolio under review for potential sale. Analysts say the platforms threatened by the strike, which are relatively old, might be candidates. And Mr. Clint of Bernstein Research estimates that Shell’s share of production from the seven platforms is just 14,000 barrels a day, a tiny fraction of its overall 3.6 million barrels.

“It will have no impact on us,” said Philip Robinson, a Shell spokesman. “We have prepared.”