Greater Adaptability in the Norwegian Oil Service Industry

Abstract

The Norwegian oil service industry has recently experienced a considerable fall in demand. The effects of this decline on the Norwegian economy will partly depend on the adaptability of the oil service industry. This article examines oil service enterprises’ assessments of their own adaptability, measured as the ability to replace lost petroleum-related sales with higher sales in other markets. The analysis is based on a survey of oil service enterprises in Norges Bank’s regional network conducted in the periods January-February 2015 and October-November 2015. The share that expected to be able to move into other markets was larger at the end of 2015 than at the beginning of 2016. This supports the hypothesis that the depreciation of the krone exchange rate and the decline in the petroleum industry in 2015 boosted the Norwegian oil service industry’s willingness and ability to adapt. At the end of 2015, the enterprises that currently only service the petroleum industry estimated that they could replace close to 10 percent of the decline in oil-related sales in other markets. The oil service enterprises that are already represented in other markets expected that they could replace close to 20 percent. Most of the enterprises reporting sound prospects for adapting to other markets are in the shipbuilding, offshore shipping and maritime equipment sectors. In the past year, many oil service enterprises in these sectors have won aquaculture, fishing, and offshore wind power contracts.