Ekofisk Committee merges with NopefSeabed gas leak halted

Redundancies follow oil price slump

person by Trude Meland, Norwegian Petroleum Museum
Oil prices fell in 1998 to their lowest level since the early 1970s, and were at times below USD 10 per barrel.
— "Heavy cuts in Phillips Petroleum A7S" from the newspaper Laagendalsposten 5.12.1998.
© Norsk Oljemuseum

This weakened the competitiveness of output from Norway’s continental shelf.[REMOVE]Fotnote: Ministry of Petroleum and Industry, Tillegg til St. meld nr 46 (1997-98) om Olje- og gassvirksomheten; oljemarkedspolitikk, rammebetingelser, Investeringsutvalgets rapport og kostnadsoverskridelser i Åsgardkjeden, Report no 37 (1998-99) to the Storting. Downloaded from  https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1998-99&paid=3&wid=b&psid=DIVL1304. and NTB, “Sterkt svekket lønnsomhet på norsk sokkel”, 2 December 1998.

The petroleum sector came under heavy pressure, and a number of oil companies announced cutbacks. These also included Phillips Petroleum.

In January 1999, the company announced that 570 people would have to leave by 31 December – partly because of Ekofisk II and the end of major projects, but also to gain necessary cost cuts.[REMOVE]Fotnote: NTB, “Myndighetene må gripe inn, mener OLF”, 15 January 1999.

Ekofisk was the Norwegian offshore field with the lowest profitability threshold. But this had improved after Phillips invested NOK 18 billion in rehabilitation.

The low oil prices had prompted the company to bring forward redundancies which were already in the pipeline, and forced it to make even bigger savings.[REMOVE]Fotnote: NTB, “Kraftige kutt i Phillips”, 4 December 1998.

Already downsizing

Three years earlier, in 1996, Phillips had launched a major change process where a new strategy plan was formulated. The goal was that the company would think more commercially.

That involved a restructuring of the whole organisation, which was to be streamlined. As part of these changes, its work processes would be rationalised.

At that time, the oil industry was buoyant. Phillips – both nationally and internationally – recorded its best-ever financial results.

The Norwegian arm increased its earnings by almost 40 per cent from 1995 thanks to a mix of buoyant oil prices and tax benefits from the high level of investment in Ekofisk II.

That was a good starting point for restructuring. In that context, the company announced new goals which involved downsizing its land organisation by 20 per cent from the autumn of 1996.

Affecting both Phillips’ own employees and contractors, these cuts ultimately amounted to 139 work years – a reduction of 17 per cent.

Fourteen platforms became redundant when Ekofisk II was ready in September 1998, and people accepted that some downsizing would come. But the price slump speeded up and reinforced this process.

Operating profit for the company halved from 1997 to 1998, with falling sales revenues, weak oil prices and increased costs taking most of the blame.

The land organisation was cut by 60 Phillips employees and 110 contractors. Four people rejected the severance package and were fired – fewer than expected.

Phillips established a support organisation for those who had to leave. It helped them with finding another job, financial advice, awareness seminars and individual follow-up.

But the downsizing did not end there. It progressed in several stages. When introducing a new operating model, Phillips decided that another 250 people had to go – this time offshore. Operating costs were to be trimmed by 25 per cent.

The company devoted 1999 and 2000 to establishing the right staffing level and stabilising the organisation. In the autumn of 2001 came the news that Phillips Petroleum and Conoco were to merge and a new organisation would be established.

Ekofisk Committee merges with NopefSeabed gas leak halted
Published 18. September 2019   •   Updated 10. October 2019
© Norsk Oljemuseum
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