EU Major Oil Producer Rigs Out of Work Amid Crisis

It is no wonder that Norway, which is one of Western Europe's foremost oil producers, became one of the countries hit hardest by the oil crisis. The depression is most visible in coastal areas, where an increasing number of oil rigs are being taken out of service and parked ashore.

In 2016, the number of idle oil rigs in Norway has more than doubled from nine to twenty. The coming summer, half of Norway's oil rigs are expected to be out of work, according to estimates by the Norwegian Ship-owners Association.

"It's a very difficult situation now. Demand from the oil companies has gone down sharply after peaking in 2014," rig analyst Lars Eirik Nicolaisen at the consulting company Rystad Energy, told Swedish Radio, predicting yet a grimmer 2017. According to Nicolaisen, a number of new oil rigs will be launched in the nearest future, tilting the balance further.

Today, the parked rigs imply around 10,000 lost jobs in the Norwegian oil industry. All in all, at least 40,000 jobs are said to have disappeared from the country's oil industry since 2014.

The ongoing oil crisis has pushed the rents for oil rigs to a level almost unimaginable in the boom years. According to Lars Eirik Nicolaisen, rates of around $150,000 per day are not uncommon today. This may sound like a lot, but it is in fact closer to break-even point.

For Norwegian rig owners, it is hardly an option to look for assignments abroad, as the global rig market is in the same boat as Norway, Nicolaisen explained, citing a falling global demand.

Whereas no profit-making upturn in the industry is expected to occur in several years, a possible solution is to scrap some of the older rigs, which are 30-40 years old, to balance the market. At the same time, it is perfectly understandable that many would hesitate.

"The older rigs can still deliver, and they would — if only they had assignments. So it is clear that rig owners who have the oldest rigs would have to act self-destructively," Nicolaisen ventured.

The oil crisis left a dent in Norway's economy which remains export-reliant. Following 2016 with a comparatively weak growth of 0.7 percent, expectations for the coming year were ratcheted down as well, mainly due to plummeting investments in the oil industry.

In two years, investments plunged from 214 billion NOK ($25bln) to only 150 billion NOK ($17bln) in 2016 and are forecasted to fall further to 130 billion NOK ($15bln) in 2018, according to the Norwegian Oil and Gas Industry Association.

Norway's Central Bank CEO Øystein Olsen admitted that the boom years seem to be over for the country's oil-propelled economy.

"Against the background of the drop in oil activity, we are in a transition phase poised to become more like other countries," Øystein Olsen said, as quoted by Swedish Radio.

Given the fact that Norway's standards of living have risen dramatically in post-war decades, much of its economic growth and welfare systems have been fueled by an abundance of natural resources, most notably the exploitation of natural resources in the North Sea, to which Norway has had sovereign rights since the 1960s.

Norway's oil prosperity allowed the Nordic country to steer clear of the EU and to maintain the world's largest pension fund, colloquially known as "the oil fund," where the surplus wealth generated by Norwegian petroleum income was deposited.