Gas prices jump as Australian LNG workers begin partial strikes at key Chevron sites
(Bloomberg) – Liquefied natural gas (LNG) workers at key Chevron Corp. sites in Australia began partial strikes Friday after talks failed to reach an agreement in a dispute that’s roiled global gas markets.
Benchmark gas futures in Europe jumped as much as 13% on the news, which highlights the region’s vulnerability after last year’s energy crisis. Spot LNG in Asia also gained. 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.
Members of the Offshore Alliance union said they will stop work completely for two weeks starting Sept. 14.
The start of the industrial action marks the culmination of weeks-long discussions that have kept markets on edge. Unions first threatened to pursue strikes at the Chevron sites and Woodside Energy Group Ltd.’s facilities in early August. Since then, Woodside reached a compromise deal with workers, while Chevron and its workers remain apart on several key claims.
Friday’s partial strikes include work stoppage and bans on carrying out overtime and some other duties.
The impact on LNG shipments isn’t likely to be immediate, and gas consumption is currently muted in both Europe and Asia. Still, the prospect of disruptions to future supply has sent prices higher as it threatens greater competition for cargoes during peak demand in the northern hemisphere winter.
Friday’s initial strikes “appear lower level, designed to create costs and inefficiencies for Chevron, but not yet impact production materially,” said Saul Kavonic, an energy analyst at Credit Suisse Group AG. However, the situation is likely to change if a compromise isn’t found by Sept. 14, according to Energy Aspects Ltd. analyst Leo Kabouche.
Japanese buyers
Japan is the biggest buyer of LNG from Chevron’s Australian plants. While it isn’t clear whether the strikes will impact production, Osaka Gas Co., which has a stake in Gorgon, will consider alternatives if its supply is affected, a spokeswoman said. Tokyo Gas Co., which also have a stake in the plant, said it is checking on impact to its LNG procurement.
Tohoku Electric Power Co., which has a purchase agreement with Wheatstone, doesn’t think it will impact its procurement plans for the time being, according to a spokesperson.
Dutch front-month gas traded up 11% at €36.34 a megawatt-hour ($11.43 per million British thermal units) by 1:28 p.m. in Amsterdam. Spot LNG in North Asia for cargoes delivered in October added 5.3% to $13.342 per MMbtu, according to S&P Global.
Europe almost never receives fuel from Australia, but curbed LNG shipments to Asia would raise competition for alternative cargoes.
Even with the recent jump, Europe’s gas prices are just a fraction of last year’s records. However, they are still elevated compared with pre-crisis levels and most market players expect the high volatility to stay.
The continent’s gas storage sites are about 93% full, well ahead of the heating season, but inventories are not designed to cover winter consumption in full. The region relies heavily on stable LNG shipments after losing most of the pipeline gas from Russia in 2022.
