A tough year for the extraction industry

Negative effects caused by the price decline

The overall production value for the industries within oil and gas extraction and related services amounted to NOK 537 billion in 2016. This is a significant decline of 19.1 per cent compared with 2015, and the second consecutive year with such a significant decrease in production value, according to updates figures from Extraction and related services.

The total value added, which is often used to measure value creation, had a significant decline of 19.7 per cent in 2016, while the intermediate consumption decreased by 17.2 per cent and ended at NOK 116 billion. The decline in production value and value added is due to a drop in oil and natural gas prices in 2016. Meanwhile, the production of oil and natural gas (measured in Sm3) was almost unchanged compared with the previous year.

Downsizing of workforce and cuts in labour costs

There were 25 300 employees in the extraction and pipeline industry in 2016, a decrease of 4.3 per cent from the previous year, while the overall labour costs were reduced by 14.6 per cent in the same year. The percentage cut in labour costs was higher than the reduction in the workforce. Thus, there was a significant reduction in labour costs per employee in this industry.

The extraction related services saw a much greater reduction in the workforce than the extraction industry. There were 27 900 employees in extraction related services, which was 5 400 fewer compared with 2015. This corresponds to a significant decline of 16.2 per cent. The extraction related services industry also had a significant cut of 19.2 per cent in labour costs.