10 HOURS AFTER THIS ARTICLE WAS FIRST POSTED, THE NORWEGIAN GOVERNMENT TERMINATED THE STRIKE ACCORDING TO THE PROVISIONS AND CONSIDERATIONS DISCUSSED HERE. AS A RESULT, THE RISK TO EUROPEAN GAS SUPPLY HAS BEEN REDUCED. WE BELIEVE THE ARTICLE CONTAINS IMPORTANT INFORMATION AND HAVE THEREFORE DECIDED TO KEEP IT AVAILABLE FOR FUTURE REFERENCE.
From July 6th, as part of the ongoing Norwegian Leaders union (“Lederne”) pay rise strike, the Norwegian deliveries of natural gas to Europe is scheduled to drop by 50 million m3/day, and likely further double to 100 million m3/day on July 9th, reducing Norwegian gas exports by over 30%. As part of scheduled maintenance, on July 11th Gazprom will further stop gas deliveries via Nordstream-1, dropping supply by about 70 million m3/day.
Total gas deliveries to North-West Europe may drop by about 20%. In addition to the general uncertainty about the duration of the strike in Norway, it is speculated that Gazprom/Russia will not resume gas supplies after the 10-day maintenance period. Prices have as a result quickly gone up by nearly 50%.
Norway, and the Leaders union, is therefore in the highly uncomfortable and paradoxical position of potentially supporting – even leading – Russia in weaponizing natural gas as part of the Ukraine crisis, while at the same time supporting Ukraine’s resistance. The combined possible natural gas supply drops from Russia and Norway dwarf the highly publicized fall in LNG exports to Europe following the Freeport LNG plant fire on June 8th – that also boosted prices. Seemingly a perfect storm for European gas.
The right to strike is deeply embodied in the legal and political frameworks most European countries, and very much so in Norway. There are escape valves via enforced settlement if a continued strike will risk life, safety or public health. In addition, enforced settlement can also be decided if the strike causes or is deemed to lead to substantial economic damage. The decision to enact enforced settlement principally lies with the Norwegian Parliament (“Stortinget”).
While enforced strike settlement based on economic damage has been applied on some occasions on the offshore sector, for example in oil and gas in 2012 on July 9th, there the right to do so has been criticized on a number of occasions as violation of human rights. In 2012 it was explicitly argued that there was no natural gas supply crisis in Europe and that storages were “full”.
Democratic processes often take an uncomfortable amount of time, but as the Ukraine crisis has shown, stasis and stablished principles can be trumped by requirements of the moment. It is therefore a reasonable expectation that the Leaders strike will find a settlement, and with less controversy than the 2012 case. Unfortunately, the process towards terminating the strike may not be fully communicated or transparent to the market and energy prices will naturally reflect this.