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Friday, September 22, 2023

Gas Prices Jump as Chevron LNG Workers Begin Strike

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Liquefied natural gas (LNG) workers at Chevron Corp. sites in Australia began strikes on Friday after talks failed to reach an agreement in a dispute that’s roiled global gas markets.

European benchmark gas prices jumped as much as 11% on the news, highlighting the market’s vulnerability after last year’s energy crisis. Partial strikes began at 1 p.m. Perth time at the Gorgon and Wheatstone facilities, which accounted for about 7% of global LNG supply last year.

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Talks have been going on for a couple of weeks now, eventually moving to mediation with the participation of the Australian Fair Work Commission.

The trade union alliance representing the workers, the Offshore Alliance, has repeatedly warned that it will cost Chevron billions if it rejects the workers’ demand.

“Despite the Offshore Alliance giving Chevron plenty of opportunity to sort out (bargaining agreements) … they will finally be facing their day of reckoning,” the trade union said earlier today.

Work stoppages at the Gorgon and Wheatstone facilities began at 5 a.m. GMT today and could last for up to 11 hours daily. The industrial action is scheduled to continue until September 14.

Reuters noted in a report that as the strikes begin, the two LNG facilities may need to be shut down, “if there are not competent personnel to undertake handovers during work stoppages,” per the OA.
The two projects together account for about 5% of global LNG supply. While Chevron failed to reach a deal with the workers, sector player Woodside, the operator of Australia’s largest LNG facility, the North West Shelf, managed to strike a deal and avert a strike.

The three LNG facilities—the North West Shelf, Gorgon, and Wheatstone—represent a tenth of global LNG supply. The threat of strikes there lifted gas prices considerably and put Europeans on high alert ahead of the coming winter.

Australia, the world’s biggest LNG exporter currently, does not export directly to Europe but due to its size, any disruption in supply there reverberates across the global LNG market. This week prices have been on the rise again, on the news about Chevron. As industrial action begins, they will likely move higher still.

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