Norway: Industrial production records largest drop in nearly four years on oil field maintenance
July 7, 2014
In May, industrial output tumbled 5.9% over the previous month in seasonally-adjusted terms. The contraction followed the revised 0.4% drop tallied in April (previously reported: -0.1% month-on-month) and marked the sharpest decline since August 2010. According to Statistics Norway, May’s contraction mainly reflected a sizeable decrease in oil and gas extraction and, to a lesser extent, a decline in manufacturing output. In addition, growth in the electricity, gas and steam sector moderated in May. According to the Norwegian Petroleum Directorate, production in several fields on the continental shelf fell in May due to planned maintenance work.
On an annual basis, industrial production fell 4.0% in working-day adjusted terms in May, which contrasted the 3.2% expansion recorded in the previous month. Despite the notable drop tallied in May, the trend continued to improve, with annual average growth in industrial production inching up from minus 0.6% in April to minus 0.5% in May—the highest level since March 2013.
Industrial production in Norway is highly affected by oil and gas extraction; the category accounts for around 72.0% of the index. According to the Ministry of Petroleum and Energy, oil and gas production has been declining ever since reaching a peak in 2001. While the government is encouraging operators to increase the recovery rates from oil and gas fields, the attempts have been undermined by increases in costs and taxes, which have thus dragged down overall industry output.