Employees at Chevron’s Australian liquefied natural gas (LNG) facilities have commenced a strike, sparking a dispute that may disrupt up to 7% of global supplies and potentially exacerbate the mounting pressure on energy prices. The lack of agreement in the pay and other issues-related discussions recently held has instigated the strike. Even after multiple sessions of negotiations and panels under the Fair Work Commission, Chevron and its employees, as represented by the Australian Offshore Alliance, have failed to reach a compromise.
The Alliance, speaking on behalf of 500 workers at the Gorgon and Wheatstone facilities located off the coast of Western Australia, has criticized Chevron’s negotiation performance. According to the union, Chevron’s (CVX) efforts have been notably unsatisfactory, leading them to declare, “It’s game on, Chevron.”
In response to the onset of the industrial strike which includes work stoppages, Chevron has confirmed that necessary measures have been taken to ensure continued safe and reliable operations. Stating that the union’s demands exceed the industry norms and recently agreed terms, they expressed the significant differences in their positions.
This impasse on the negotiation table has inadvertently affected the European natural gas markets, propelling a sharp increase in Dutch gas futures, a benchmark for the region. The escalating dependency of Europe on global LNG supplies, exacerbated by the significantly reduced pipeline gas deliveries from Russia since February 2022, has been a catalyst in the surging energy prices.
In the face of the imminent heating season, the region has been actively stockpiling natural gas, hitting 90% capacity two months early of the target date set by the European Commission. Despite the plummeting prices since last year, external factors including a severe winter or sustained global supply disruption could still drive prices upwards. The upward trend in oil prices caused by output cuts by Saudi Arabia and Russia is also a contributing factor.
The striking employees’ escalating industrial action plan, with a total strike set to initiate on 14th September, could result in forcing LNG consumers in Asia to find other sources. If production halts in both Chevron sites for a month, around 7% of global supply could vaporize, as per energy consultancy Wood Mackenzie. However, experts remain hopeful of avoiding such a scenario and maintain that the risk of significant production losses continues to be relatively low. The potential interruptions add to the precariously poised energy security scenario as we head into winter, with experts warning against early complacency.
