Unification and the unions

BP Amoco plc ranked as the biggest US oil and gas producer and the largest enterprise in the UK.[REMOVE]Fotnote: Nopef Aktuelt no 7, 1998, “Som julekvelden på kjerringa”. Worth almost NOK 840 billion, it was also one of the world’s three largest oil companies alongside Exxon and Shell. In a bleak international oil market, with prices at a record low of USD 10 per barrel, the stock market reacted positively to the news, and both Amoco and BP saw their share price rise immediately.

Analysts hailed the merger as “a perfect marriage”, pointing to Amoco’s strength in areas where BP was weak – chemicals, refineries and marketing in the USA and natural gas in North America. The two companies expected to save USD 2 billion from joining forces, partly by making 6 000 members of the global workforce redundant.

Although the merger was presented as an alliance between two equal companies, a takeover was closer to the truth – with BP as the stronger party.

The respective Norwegian subsidiaries – Amoco Norway and BP Norge – were more equal in size. But merging them would create a considerably stronger offshore player than they were separately. Amoco was operator for Valhall and Hod, with about 400 employees on land and on the Norwegian continental shelf (NCS), while BP operated Ula and Gyda. In addition, Amoco was responsible for the recent Skarv discovery in the Norwegian Sea.

Union reactions

The merger came as a bolt from the blue for the employees.[REMOVE]Fotnote: Nopef Aktuelt no 7, 1998, “Som julekvelden på kjerringa”. Secret talks had been going on for nine months before the news broke, with only a handful of people in the know. Code names were used to conceal the process, with the merger itself referred to as Belgium, Amoco as Eagle and BP as Bear. An undisclosed third company involved for part of the time was Hawk.[REMOVE]Fotnote: Internal document from the ABC, Nopef branch 043. Undated.

Although the management in Norway had been kept in the dark about the merger, Anders Mørland – Amoco’s Norwegian chief executive at the time – has said it was clear that something would be happening. There was talk that the company needed to make further progress with its growth phase, and many people knew that other players had been sounded out.

When the news was released at a senior management meeting in London, the reception was fairly positive. It was again seen as the “perfect” mix, with the two companies complementing each other in terms of both the oil-to-gas ratio and geographically.[REMOVE]Fotnote: Interview with Anders Mørland, 22 January 2015.

Once the cat was out of the bag, things moved swiftly. The merger process was due to be completed by 1 January 1999, with the new BP Amoco company becoming operator for Valhall, Hod, Gyda and Ula.

A 90-day activity map and milestones schedule (the 90-day plan) was drawn up by the business unit (BU) leadership in Norway to manage progress with the merger. This document outlined 41 activity requirements divided between 13 areas which were to have been completed by the end of a three-month period.

Work was also pursued in parallel to get the merger approved by various government bodies, with the US competition authorities taking only four months to consent – considered unusually speedy.

In Norway, the deal had to be considered by three different ministries – petroleum and energy pursuant to the Petroleum Act, industry and trade under the Acquisition Act, and finance pursuant to the Petroleum Tax Act. Final approval was not in place until the autumn of 1999.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , p 39.

Where the unions were concerned, the news meant changes to their plans. The question was how the house organisations – Amoco Company Club (ABC) and the BP Offshore Club (BPOK) – should respond.

This raised in turn the issues of how these unions could exert an influence on two multinational giants and how they could best protect the rights of the workforce. The principles underpinning the merger process were established by the global management of BP Amoco, which made it difficult for the Norwegian subsidiaries or their unions to have any say.[REMOVE]Fotnote: Norwegian Petroleum Directorate, Rapport etter tilsyn med BP Amoco’s planlegging og gjennomføring av organisatoriske omstillingsprosesser – varsel om pålegg (Report of the audit of BP Amoco’s planning and execution of organisational restructuring processes – notice of an order), 2 November 1999.

As the biggest union in Amoco, the ABC recognised at an early stage that opposition to the merger was pointless since the process could not be halted. It decided instead to devote all its resources to minimising the consequences for those affected in such areas as mass redundancies because functions would now be duplicated.

Other areas of concern included outsourcing in line with the BP tradition, offshore synergies, several equally sized unions, appointment of safety delegates and reduced representation in committees and governing bodies.

Two issues came to dominate the union campaign – the fight against outsourcing and the criteria for downsize the workforce. Developing a strategy and getting into a position to exercise influence and co-determination in the process also called for access to information and the merged company’s plans and strategies.

This proved a challenge. The flow of information ceased after the merger plans were made public.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning , p 241. Uncertainty and dissatisfaction began to spread among the employees. The unions could do nothing because they were unable to find out what was going to happen, and expressed their dissatisfaction in a series of letters to management in both companies – without success.

As branch 43 of the Norwegian Oil and Petrochemical Workers Union (Nopef), the ABC received good help from the latter and its leader, Lars Anders Myhre, in its fight to be kept informed. The International Federation of Chemical, Energy, Mine and General Workers’ Unions (IECM), the world’s largest combine of oil workers, was due to meet in the Irish city of Cork. Myhre persuaded the leaders of union branches in Amoco and BP worldwide to stop over in London ahead of this gathering and to turn up at Britannic House, BP’s monumental HQ.

They arrived without prior notice, but five senior executives from the oil company agreed to meet them. The unions demanded to become involved, acquire more influence and get a better dialogue. However, their principal demand was more information. According to ABC official Ingard Haugeberg, this meeting proved both positive and rewarding.[REMOVE]Fotnote: Rasen, Bjørn (2007): LF6A. Valhall at 25 … and it’s only the beginning, p 424.

The flow of information improved, a dialogue was launched between management and workers, and the unions learnt more details which could be passed on to their members. Although these improvements helped to calm the mood among the workforce, the unions had more than enough issues they needed to get to grips with.

Collegium hired

In addition to information, finding new partners and modes of working were crucial. A small union branch with 220 members could not stand alone. To avoid internal conflicts between employees from the former Amoco and BP subsidiaries, the ABC and the BPOK entered into a nine-point collaboration deal and signed a letter of intent to act with one voice towards the BP-Amoco management.[REMOVE]Fotnote: Annual report for the BPOK, 14 April 1998-8 February 1999. ABC archive.

While the BPOK was still part of the Federation of Offshore Workers Trade Unions (OFS), the ABC had shifted from that umbrella organisation to Nopef only a couple of years earlier. The OFS had take the Amoco branch to court on the grounds that the members on Valhall could not change to Nopef without paying financial compensation.

Although the ABC won in the Supreme Court in 1997, the divorce was not a happy one. But the OFS and Nopef were now working together at branch level – an impressive achievement after the long conflict between them. (See the article: The ABC union – from outsider to insider.)

The two union branches developed a good and constructive collaboration, and agreed to talk as little as possible about their parent organisations. They undertook to inform each other well in advance if help was needed from Nopef or the OFS, and acted as a single organisation in everything connected with the merger.

The pair had collaborated even before the unification, since both covered the southern flank of the NCS and had shared common interests and goals for many years. That partnership had covered a number of cases, including the Co-op process which eventually became the operating alliance for the southern fields.[REMOVE]Fotnote: BP Amoco Nytt , no 2, week 4, 1999 “Samarbeid BPOK og ABC”.

A cooperation committee comprising three members from each branch was established with Haugeberg as chair and spokesperson on behalf of the workers in both Amoco and BP.

To establish a strategy which could safeguard worker rights as much as possible, this committee hired a consultancy called Collegium. Haugeberg had received a letter – wrongly addressed, as it happened – which explained how BP and Amoco intended to implement the merger process internationally. This used terms such as “merger through anarchy” in order to destabilise the companies and create uncertainty in order to drive through the necessary changes more easily.

Collegium had long experience of providing management courses for this type of merger and restructuring process. It now received the opposite challenge of helping unions and a workforce. The brief was to identify how the employees should act and the strategies they ought to adopt in order to resist management as firmly as possible and to win through with their issues.

Haugeberg sent the whole committee on a one-week course, which meant its members knew a lot about such processes and were well prepared when meeting management.[REMOVE]Fotnote: Interview with Haugeberg. He described the advice as expensive, but worth the money. [REMOVE]Fotnote: Letter from Haugeberg, undated.

The BP and Amoco unions feared that land-based jobs would be halved, that whole departments would be outsourced and that offshore safety would come under pressure. They accordingly turned to Christian Democrat prime minister Kjell Magne Bondevik for help, sending identical letters to him and Gunnar Berge, director general of the Norwegian Petroleum Directorate (NPD), on 8 December 1998.

The two organisations made it clear that they did not opposed the merger, but that their rights and duties as union officials under Norwegian law were being ignored. They had no opportunities to influence decisions which affected their own jobs in Norway. “We fear a halving of the workforce on land and a downsizing offshore, as well as outsourcing to evade their future employer responsibilities,” Bondevik was told.[REMOVE]Fotnote: Stavanger Aftenblad, 9 December 1998, “Går til Bondevik for å få hjelp”.

“Those who’ll suffer are primarily the workers, but this will have spin-offs in the long run for both central and local government in the form of unemployment and lost revenues. “We also see a greater risk of accidents on the NCS, where offshore personnel would be badly injured and the marine ecosystem destroyed.”

The unions believed a new and hard-pressed operations team on land, combined with an oil price which created pressure to pursue reckless cost savings, could have disastrous consequences.

Their aim with the letters to Bondevik and Berge was to clarify what requirements the government could set and what contribution it could make to protect jobs and safety. The premier himself was unable to meet the cooperation committee, but instead arranged a meeting with the top civil servants in the ministries for petroleum and energy, local government and labour, and industry and trade.

In addition, the unions got to meet the senior experts in the NPD. Berge appeared on radio and TV only a few days later with statements about downsizing and safety in the North Sea.[REMOVE]Fotnote: Memo from Haugeberg, undated.

The letters to Bondevik and Berge attracted great media attention, something the unions depended on. ABC used the press – and secured coverage in almost all Norway’s newspapers as well as on national and local radio and TV programmes from the Norwegian Broadcasting Corporation (NRK).

Conscious use was made of the media to create a public debate on offshore downsizing, outsourcing and safety. The aim was to have public opinion on the union side in the forthcoming negotiations.

To obtain written documentation for use in possible later disputes, negotiating meetings were held where protocols on access to information and co-determination were signed. All eventualities had to be provided for. The company had basically been very unwilling to involve the unions, and the ABC threatened that the whole workforce would oppose the merger unless matters improved.

After the media coverage already obtained, such an action would probably have attracted great public attention. The companies were not keen on events taking such a turn, and thereby signed an agreement which promised full co-determination.

Downsizing

BP Amoco sent an announcement on 1 February 1999 to the unions, the working environment committee and the works council concerning possible mass redundancies as a result of the merger. Substantial overlaps between the two organisations meant that some employees would become surplus to requirements. The question was not whether someone had to go, but who they would be and what selection criteria would apply.

The company presented a procedure which the ABC opposed. Only the best were to remain, and the same staffing process would apply in both Amoco and BP. This built on experience gained by BP from its most recent reorganisation in 1994, with personal profiling and performance assessment reviews as key elements. See the article on changes to corporate culture.

Each employee had to prepare a personal profile covering their education and experience and outlining their career ambitions, while relevant historical information on them was collected by the human resources (HR) department.

At the next stage, the individual’s department head – in close consultation with discipline leaders and the HR team – assessed and ranked them in terms of experience and performance. This was done by awarding points, which were also given for relevant education. The maximum was 100, which broke down into 20 for education, 30 for the way the person concerned did their job and 50 for performance criteria.[REMOVE]Fotnote: Amoco Info no 18, week 50, 1998, “Slik blir bemanningssituasjonen”, and letter from BP Amoco to the Ministry of Trade and Industry, dated 11 May 1999.

Education, professional experience and possible personal wishes were accordingly to be provided by the employee themselves. This was then used by the management in a discussion on which personnel were relevant for the various jobs in the new organisation.[REMOVE]Fotnote: Amoco Info no 16, week 46, 1998.

According to senior executives, the personal profile was intended to serve as an aid for both employee and management. It was supposed to be positive for people to devote a little time to reviewing what they had done and achieved in recent years. The personal profile for employees in Amoco Norway was only to be used in the Norwegian context, and would not be made available to BP either.[REMOVE]Fotnote: BP Amoco Info no 16, week 46, 1998.

Seniority would not be crucial and no voluntary element was incorporated in the process. The ABC hired lawyer Håkon Helle to review the “outline for assessing and ranking personnel in connection with staffing the BP Amoco organisation”. He expressed concern that employees were obliged to complete a personal profile as part of the downsizing process, and maintained that this had to be entirely voluntary. But the most serious objection was that redundancies would be implemented without regard to the individual’s seniority (length of service) in the company.

The ranking based on expertise and performance appeared to provide the basis for deciding who the company wanted to retain. Those with the fewest points would be offered a severance package or, if this was refused, dismissed.

According to the main agreement between the Norwegian Confederation of Trade Unions (LO) and the Confederation of Norwegian Enterprise (NHO), length of service should normally apply when implementing redundancies. The selection method adopted by the company accordingly failed to comply with the provisions of this negotiated “charter” for union-management relations in Norway.[REMOVE]Fotnote: Letter from lawyer Håkon Helle to Ingard Haugeberg at the BP Amoco Cooperation Committee, dated 21 December 1998, HH/8953-98/ib.

At an early stage, the union made it clear that redundancies which conflicted with the seniority principle would not be accepted unless a lack of qualifications or poor performance could be proven.[REMOVE]Fotnote: Memo from a meeting of the works council, 21 December 1998.

The offshore workforce was initially shielded from the downsizing process. BP Amoco had to keep the money machine working while it restructured and reduced on land. People on the fields were accordingly less affected by the merger to begin with. If anything, the level of activity called for more employees rather than fewer.

However, the offshore organisation was affected by the restructuring. The unions claimed that staffing on land became so small that it lacked capacity to follow up work on the NCS. Overall, the original land-based workforce in BP and Amoco was cut by 53 per cent. This meant that four fields – Hod, Valhall, Ula and Gyda – had to be run by fewer people than had been needed for two.

The unions secured the support of the NPD on this issue, while BP Amoco maintained that the support given to Ula and Gyda by the former BP land team was enough for Valhall’s requirements.

Combined with simplification, efficiency improvements, better resource utilisation and planned outsourcing, a 50 per cent staff reduction was regarded as appropriate.

One condition of the merger, in other words, was that the offshore organisation should be protected during the 90-day period. But the NPD maintained that the changes on land would unavoidably affect the operating parameters for the NCS workforce – not least because its members had been told their jobs were shielded and so failed to involve themselves in the process.

Ahead of and concurrently with the downsizing, change processes were instituted on Valhall, Ula and Gyda which included restructuring, redundancies and transferring functions to land.

New management systems and modification projects had also been introduced. A number of these activities were shelved on Valhall, while BP’s goals and systems were introduced. The workload and lack of time for union officials were so great that genuine co-determination proved impossible. These pressures partly reflected a project for reducing “lifting costs” (in other words, the cost of production) being pursued in parallel.

At the same time, support functions on land lacked sufficient resources to follow up their own restructuring and to provide necessary backing for measures being take offshore.

Union loyalties were primarily to their own members, and the ABC ensured that none of the employees who belonged to it were made redundant. Everyone who left the merged company also had their first or second wish met. As a union, it was accordingly satisfied that its members got what they wanted.

Severance package

Redundancy pay, early retirement and further education packages were discussed between the two sides, and agreement was achieved on such measures. A number of the employees made redundant were either outsourced (15 in all), transferred offshore (10) or expatriates who got sent home (36).

About 130 people were covered by the severance pay scheme or took early retirement. Everyone received at least six months pay in addition to three months notice. The maximum was two years pay plus three months.[REMOVE]Fotnote: Amoco Info no 18, week 50, 1998, “Flere nye navn”.

In addition, financial assistance of up to NOK 30 000 per employee was offered for education, as well as assistance in finding a new job. BP Amoco had hired consultancy Tennebø og Partners AS to help with careers advice and job-seeking. The great majority of those offered the severance package or early retirement accepted. Although the unions were opposed in principle to such pay-outs, they accepted that these were good schemes.

Outsourcing services

The big fight over principles concerned outsourcing. BP was the oil company which had taken the most drastic steps in this direction in Norway. It had outsourced its accounting and finance functions in September 1994, supply base in February 1996, IT services that May, legal department the following month, and office management and services a year later.

In other words, an HR policy on the BP model in the new company would result in extensive outsourcing which left thousands of employees with a new employer – or no job. A number of activities outsourced by BP were conducted in Amoco by in-house personnel, who now faced the threat of being transferred to a new employer.[REMOVE]Fotnote: Letter from BP Amoco to the working environment committees at Verven and Forus, the Forus and Verven works councils, the Confederation of Employees in the Private Sector (Prifo) at Forus and Nopef at Verven, dated 1 February 1999 and signed by HR head Kåre Ekroll.

Nopef was concerned about a possible outsourcing of services, and expressed its worries in a letter to the Ministry of Trade and Industry.

The union feared that the merger would be negative for employment in Norway’s oil industry, and would reduce national control of petroleum production from the NCS.[REMOVE]Fotnote: Letter from Leif Sande at Nopef to the Ministry of Trade and Industry, dated 3 June 1999, HH/8953-98/ib, and letter from Håkon Helle to the Ministry of Trade and Industry, dated 27 May 1999, HH/8953-98/ib.

Nopef noted that both BP and Amoco were foreign groups, whose Norwegian operations were wholly owned by British and US companies respectively. Significant differences had existed over the actual independence of the Norwegian subsidiaries in both cases.

Amoco had possessed a relatively large Norwegian operation, based on using its own personnel to deal with the key functions of an operator. However, BP had built up a model where as much as possible of the business had been outsourced to contractors, so that key functions were located in companies outside BP Norge.

According to Nopef, the merger was more a takeover by BP than a union of two equal companies. BP’s organisational model and corporate philosophy would mean that much of the merged company’s activities in Norway were outsourced.

The union feared that the practical significance of this was that the Norwegian leadership of the business would be weak, with most of the significant decisions taken at the London head office. BP Amoco Norge AS would thereby be left with a minimum of employees and influence over oil exploration and production on the NCS.

Nopef took the view that this decision was very worrying both from a social perspective and for the company’s employees. While it would not oppose the merger, the union asked the ministry to set terms which could counteract its possible negative effects.

Economist Torstein Dahle was commissioned by Nopef to assess the economic aspects of the organisational changes being implemented in connection with the merger. He found that the united company would not derive any financial benefit from outsourcing important parts of the business to subcontractors. His general conclusion was that Amoco’s philosophy in this area had offered a more cost-effective way of operating than the BP approach.[REMOVE]Fotnote: Dahle, Torstein, 4 June 1999, Økonomisk vurdering av noen organisasjonsendringer knyttet til fusjonen mellom BP Petroleum Development Norway AS og Amoco Norway AS . De Facto.

Workforce reductions based on efficiency improvements were not opposed by the unions, but they maintained that outsourcing was unprofitable.

Other arguments against the practice included weakening the influence of the Norwegian subsidiary and undermining the rights of its employees. Outsourcing represented a pulverisation of employer responsibilities, it was said, and acted against the ability of the workforce to organise itself in line with Norwegian practice.

Experience showed that opportunities for maintaining a strong union organisation were much poorer in a system split up on the BP Norge model than with the integrated Amoco solution. But the unions lost this fight. Orders were issued from the UK headquarters of BP Amoco to outsource a number of functions in Amoco’s land-based operations – IT, finance, facilities and services, business and the base organisation.

The new land organisation for the merged company would have 242 employees, plus 10 hired in from other companies, compared with 179 for BP and 258 in Amoco – 434 in all – pre-unification. With the two companies also previously employing 100 contract staff, the workforce would accordingly be cut by 53 per cent from 534 to 252 people.

Part of this reduction could be explained by synergies from the merger, but Nopef maintained that the biggest share came from outsourcing much of the business. It claimed that decision-making authority had also been transferred from Norway to London.

NPD audit

The unions were not alone in showing concern over some of the organisational developments associated with the merger process, and the NPD conducted an audit of the new company in late 1999. Its aim was to study the planning, execution and follow-up of the reorganisation and the changes to management systems, including the way employee co-determination was being practised.

According to the NPD, the merger and associated reorganisation and downsizing of the land organisation’s support functions had been implemented without any advance analysis of the consequences of the process for the working environment and offshore safety. The outcome was a notice of an order from the regulator, which took the view that BP Amoco had failed to analyse the impact of the organisational changes made and planned offshore and on land.

As a result, the company was unable to document that it was able to maintain an acceptable working environment and level of safety on its NCS installations.

BP Amoco was ordered to conduct an overall review and analysis of the consequences of planned and implemented merger-related downsizing and restructuring, and parallel change processes. On that basis, the company was required both to assess the need for action and to take it where necessary.

Worker co-determination was to be ensured in all phases, and all relevant units were to contribute to the analysis.[REMOVE]Fotnote: Norwegian Petroleum Directorate, 2 November 1999, Rapport etter tilsyn med BP Amoco’s planlegging og gjennomføring av organisatoriske omstillingsprosesser – varsel om pålegg. BP met the six-month deadline it was given, and the necessary measures were adopted.