Impending Chevron LNG Plant Strikes in Australia Trigger Concerns of Global Gas Price Surge
In a potentially disruptive move, workers at two Australian liquefied natural gas (LNG) facilities operated by Chevron have declared their intent to commence a strike on September 7. The announcement follows weeks of negotiations between the unions and the energy giant regarding compensation and working conditions. This development comes shortly after a strike was narrowly averted at Woodside Energy’s North West Shelf LNG plant, Australia's largest, just last week.
The Wheatstone and Gorgon LNG plants, both managed by Chevron, constitute slightly over 5% of the world's LNG supply. When combined with the output of the North West Shelf facility, the figure jumps to 10% of the global supply. Australia, as a major LNG exporter, plays a crucial role in satisfying the global demand for this energy source, which is vital for heating, cooking, and power generation.
Global Gas Price Implications
If the strike extends over a more prolonged period, global gas prices could see a significant upswing, reminiscent of the critical levels witnessed in 2022. The mere speculation of strikes in Australia last week led to a surge in gas prices across Europe, although the situation normalized after the Woodside North West Shelf strike was averted. However, the revelation of planned Chevron strikes led to another spike in European natural gas prices on Monday. The benchmark price of Dutch natural gas climbed by 10.4% to €38.40/megawatt hour (MWh), representing a €2.40 increase from the Friday closing rate of €36/MWh, which was already higher by 3.5%.
Presently, global LNG inventories remain relatively robust and steady. However, Asia relies heavily on Australian LNG supplies. Should these stores diminish due to sustained strikes, the Asian market could be compelled to seek alternate sources, potentially redirecting Atlantic Basin supplies, which often cater to Europe. This shift could create ripple effects throughout the global market.
Chevron's Workforce and Negotiations
Chevron's two plants employ around 500 individuals. A spokesperson from Chevron Australia has confirmed that they have received notice of the impending strike. The industrial action could lead to a loss of approximately 11 working hours per day. The Offshore Alliance, a coalition of the Australian Workers’ Union and the Maritime Union of Australia representing energy workers, revealed that workers plan to undertake up to 20 different types of industrial actions. These actions could encompass brief work stoppages, task bans, and complete work stoppages.
An anonymous source indicated that employees at the Wheatstone and Gorgon plants intend to halt work for three hours initially, with the number of hours escalating as the strike continues. Chevron has expressed its commitment to maintain "safe and reliable operations in the event of disruption." The company maintains that negotiations are ongoing, with a focus on reaching a mutually beneficial resolution for both the corporation and its employees. The Offshore Alliance has called for Chevron to align its practices with industry leaders like Shell, particularly in terms of compensation. They also emphasized the need for Chevron to embrace an industry-standard agreement for company work, asserting that workers have been let down by the firm's handling of the negotiation process.
As September 7 approaches, the potential strike casts uncertainty over Australia's LNG landscape and the subsequent global gas prices. The outcome hinges on the resolution of key issues between Chevron and its workforce.