Potential strikes at three major liquefied natural gas (LNG) facilities in Australia pose a significant threat to approximately 10% of the world’s global exports of this fuel, potentially triggering a fresh energy price upheaval across both Asia and Europe.
Workers at key facilities operated by Chevron Corp. and Woodside Energy Group Ltd. in Australia have given their nod for industrial action at the North West Shelf, Wheatstone, and Gorgon operations. Some walkouts could commence as early as the upcoming week in accordance with labor regulations.
On Thursday, European natural gas prices experienced fluctuations as traders assessed the potential impact of these strikes, partially retracting from the 28% surge observed the previous day. This development underscores the region’s underlying concerns about supply security, particularly after last year’s crisis that resulted in reduced gas flows from Russia – historically a significant supplier of heating and power plant fuel. These concerns persist despite European gas storage levels currently standing at nearly 90%, surpassing the five-year average.
The employees are demanding better benchmark pay and improved working conditions, along with measures to enhance job security, such as restrictions on outsourcing roles to labor contractors, according to a statement from the Offshore Alliance, a coalition of two key labor unions.
Potential actions by the workforce could involve activities like refusing to load tankers or vessels, or initiating work stoppages, as outlined by the alliance. Ongoing negotiations between labor representatives and company officials are underway, with further discussions scheduled for Tuesday, the group confirmed.
Following a vote involving approximately 150 Woodside staff members, industrial action at select producer sites situated off the Western Australian coast may be triggered within a 30-day window, provided a seven-working-day notice period, the company stated.
Australia’s LNG sector is predicted to yield export earnings of A$68 billion ($45 billion) in the fiscal year ending on June 30, according to the nation’s government. The present dispute places a multi-billion-dollar industry at risk due to the demands of a few hundred workers seeking wage increases, a situation that Kavonic characterizes as astonishing given the asymmetry of the stakes.
The report further highlights that any disruption in Australia’s exports could intensify competition for LNG cargoes between Asia and Europe, the latter of which has increasingly turned to seaborne LNG to reduce reliance on Russian gas exports. Coupled with elevated winter consumption, this potential scenario may result in price volatility during the final quarter of 2023.