Published in Dagens Næringsliv
10.02.14
byJostein Løvås

Slowing down. Vindafjord glimmers of oil wealth. A giant ship yard equips oil rigs, another dismantles them. Two brothers have made a NOK billion business on oil consultancy. Now, the uncertainty is increasing.

“They call it the NOK billion Mile.”

Rose painter Unni Marie Lien strolls among trolls and traditional Norwegian handicrafts in her very colourful shop along the E 134 route through Ølen. The former Ringerike resident is talking about the few kilometers starting north in Ølen stretching to Vats further south.

A cliché, yes, but Vindafjord municipality is Norway’s oil business in miniature. Here, in a sparsely populated area in the northern part of Rogaland county, you will find the the NOK billion companies lined up. Most of them are based on oil related businesses, but among them we find a giant slaughterhouse and meat exporter Fatland and electronics empire Hatteland.

“We may not realize it every day, but the industry around here is amazing,” says Lien.

Lately, people have started to see things differently. Oil town Ølensvåg has been struck by the unthinkable . The shipyard starts releasing workers.

Oil companies constricting cash-flow

What is happening in Vindafjord is an illustration of the change in Norwegian oil industry. The oil price has not changed over the last few years, but the costs have increased by ten percent. Now, oil companies want out of this development. Increase in costs is an international phenomenon, but many reports also point to higher costs especially for Norway.

Statoil lets people go, delays projects and demands new models for cooperation with the supplier industry. During Statoil’s annual strategy update in London Friday, the company announced that the investment budget will be cut with 30 NOK billion over the next three years, an equivalent to an 8 percent reduction.

Must terminate workers’ contracts

Even though the cranes are working to lift new equipment on board the drilling rig West Alpha, the change in pace is noticeable on the docks in Ølensvåg. Down on the dock we meet Concern Manager in Westcon Ship yard Arne Birkeland. As the winter sun shines through the rigs, he reflects on the time ahead.

Birkeland recently announced that the family-owned yard with approximately 500 employees needed to temporarily lay off 100 and terminate the contracts of 16. He is short of rig assignments. 2013 was supposed to be the big rig year in Norway. Instead, a number of lucrative rig equipment assignments went abroad. Birkeland is remorseful that the special demands in Norway make it harder for him to compete. Still, he does not wish to overdramatize the situation. He points out that the level of activity in the yard was at a record high before the cuts. And that has made its mark: The entire hillside behind the yard is packed with grey housing barracks for foreign employees. They have capacity of 1 000 beds. That is more than the total number of beds at all the hotels in the Haugalandet region. That is a good indication of the temperature in the industry here. Now, Birkeland trusts that the oil price will stay at a high level in the time to come. Today, we have approximately 50 rigs on the Norwegian shelf, three times as many as ten years ago.

“We are making this work. We would not have bought a ship yard in Florø if we were that pessimistic,” Birkeland says.

He praises the competitive mentality and business sense in Ølensvåg. Local family Matre built Westcon and took the chance of adapting the yard business to rig maintenance in the early nineties, in good time before the assignments came. Birkeland lives in neighbouring municipality of Sveio, and says the business style in Vindafjord is completely different.

“This is a place where it is ok to be successful. Your neighbour wants you to be successful. And your neighbour will work hard to do even better. Anywhere else, if someone succeeds, others around you will say you’ve been lucky.”

Two Big Brothers

Amongst those who have enjoyed success in Vindafjord, it is almost impossible to avoid the two sons of a local pig farmer. Sigmund Lunde and Tor Erling Lunde started their data and consultancy companies respectively in the 80’s. They merged their companies into a single data and consultancy firm 'Omega' in 1990. Last year, the firm had around 1000 employees, offices in several countries and 1.5 billion NOK in turnover and a profit of around 60 million NOK. Currently, the brothers control roughly 40% of the company.

They specialise in helping oil companies control their gigantic development projects. They do this by supplying experienced oil & gas consultants and their own IT system PIMS “Project Information Management System”.

There is little dress factor with us. We have our feet on the ground and know the details, says chariman Sigmund Lunde. He sits in the main office in Ølensvåg with the rigs at Westcon yard shining brightly through his window. Omega has received assistance from Westcon and other local businesses since its inception. His brother is also there, having a short stay between consultancy assignments for large customers. He is always on the move.

"All together I have spent no more than three or four weeks in the office since 1987," says Tor Erling Lunde. The turnover chart shows an almost exponential growth. It has been difficult to get enough people and equally difficult to house employees in the area. Omega had to start its own house building firm to help solve this problem, Omega Hus.

Even though the profit margins in the consultancy market are low, the Lunde brothers and other shareholders have done well. Managing Director, Petter Aalvik, says it has to be like this. He would like to have even more capital at his disposal for harder times. Sigmund Lunde is not afraid of greater cost awareness in the oil industry.

The focus on cost is something we have an appreciation for. It provides us with new opportunities. We are not expensive. Our hourly rates are on a level with the costs companies have for their own employees. If project development stops completely it can present a problem for us, but a slower rate is fine. It was all hands to the pumps in 2007.

Destroying the giants

Should the oil age stagnate, Vindafjord has more or less prepared itself for it. Around the ice cold Yrkefjord, the mountain sides eccos the rumblings from AF Decom, where old oil platforms from the Ekofisk field are deconstructed. Forty metre high platform foundations are cut up by men with huge torches, dangling in baskets from a crane. In this deep fjord, several of the large concrete foundations were connected to its platform decks a couple of decades ago. Now, the place looks like an oil age crematorium. Large entrepreneur concern AF Group has invested approximately NOK 600 million in this facility. It has special drainage systems to prevent pollution, even though there is some local skepticism. From one of the large machines operating a gigantic claw, Josef Blikra is cutting up old oil installations. He hasn’t managed to give up on the local business sense.

“I was a farmer for 30 years, and that is still with me when I am working with such large, expensive machines. I take care of them.”

Slow night at the pub

Back in Ølen city centre, the night darkness has settled over the town’s newly restored pedestrian area, where arty blue lights shine up from the pavements. «I can’t get no satisfaction» is pounding from the speakers at the JoaKari Pub. Only one single worker in a worn out jacket sticks his head in to see what’s happening tonight. Vocalist is pub owner Egil Jørgensen. He is accompanied by to local guitarists and a preprogrammed rhythm and bass section from Japan. Jørgensen has moved here from Drammen. He is the manager of pubs in both Odda, Ølen and Åkra in addition to the local catering company Catering Partner.

He knows all about the downturn in the ship yard. At its busiest the pub was jam packed with foreign yard workers several nights a week. Now he has trouble filling the room during weekends.

“We are serving shrimps on Saturday and fifty people have already signed up. Westcon’s own band is playing”. Under the shimmers of a light post right outside the pub, a young man is working on his Honda Accord, with yellow lights on the roof and spots of rust along the sides.

“It’s a car I like to show off”, says Kristoffer Hauerbach, smiling. He moved here from Haugesund with his mother in his early teens. That wasn’t easy. Since then he has been working a bit at Westcon. Now, he has taken a truck driver license. He wants to get away. He does not think there are many opportunities here. Hauerbach might have lost faith, but Ølen won’t give up. On the other side of the bay the lights are still shining from the Westcon years. Like a fairytale oil castle.

The NOK billion mile

A number of large companies are located along just a few km of road in the Vindafjord municipality. Many of them operate in oil-related businesses..

Resultatet for utvalgte Vindafjord-bedrifter:
Results for a selection of Vindafjord companies (in NOK mill)