Chevron’s Australian LNG Strikes Threaten UK Gas Supplies

The UK gas market is bracing for potential disruptions as Chevron faces a two-week total strike at its Australian Liquefied Natural Gas (LNG) projects. The looming industrial action has sent ripples across global gas markets, with the UK being no exception. 

Australia, one of the world’s largest LNG exporters, has been embroiled in a labour dispute involving two of its most significant LNG production facilities operated by Chevron Corp. The Gorgon and Wheatstone LNG facilities, which are among Australia’s largest, are at the heart of this dispute. 

Starting 7 September, workers are set to down tools and halt specific tasks at these facilities. The Offshore Alliance union group has warned Chevron of escalating work stoppages, beginning with a seven-hour halt split across two time blocks and culminating in an 11-hour stoppage on 9 September. And, such actions are expected to intensify from 8 September to 13 September. 

Additionally, approximately 500 employees at these Chevron sites, represented by the unions, are echoing a similar action taken against Shell last year. That strike cost the company about $1 billion in lost exports over two months. 

The core of the dispute revolves around demands for higher pay and more control over rosters, promotions, and other conditions. 

While the bulk of LNG exports from Gorgon and Wheatstone are directed towards Asian markets like Japan, South Korea, China, and Taiwan, the UK market could feel the pinch as the northern hemisphere’s winter season approaches. 

Futhermore, the potential strike action is set to exacerbate an already tightening market, especially with a resurgence in Chinese demand and unexpected outages in Norway. 

Analysts predict significant price volatility, viewing it as an indication of increasing market tightness ahead of Europe’s rising winter demand. 

The potential industrial action at Chevron’s facilities has already caused concerns over supply, leading to a spike in Asia’s spot LNG prices. 

As the UK grapples with its energy needs, the situation in Australia serves as a stark reminder of the interconnectedness of global energy markets and the potential vulnerabilities they face. 

What UK Market Stakeholders Need to Know 

Mediation in Progress: In light of the impending industrial action at Chevron’s Australian LNG facilities, mediation talks are currently underway. These discussions aim to find common ground and avert the planned strikes, which, if they proceed, could have implications for global gas markets, including the UK. 

Timeline of Events: The strikes are scheduled to begin on 7 September. Workers at Chevron’s Gorgon and Wheatstone LNG export plants have outlined a series of work stoppages. Initially, these will span 7 hours a day but could extend to as much as 11 hours daily from 7 to 13 September. The nature of these stoppages is expected to be rolling, with bans and limitations that will intensify each week. The escalation will continue until Chevron responds favourably to the bargaining claims presented by the Offshore Alliance. 

Market Impact: 

Current Price Impact: As of now, the market has not witnessed any significant price fluctuations due to the anticipated strikes. The reason being, the potential impact of these strikes has already been factored into current pricing models. Additionally, the immediate effect on LNG volumes is projected to be minimal. 

Potential Future Impact: The real concern arises when we look ahead. If the industrial action extends into the winter months, a period of heightened energy demand, the UK gas market could experience increased price volatility. The primary driver behind this would be the uncertainty surrounding LNG supplies during a crucial consumption period. 

For stakeholders in the UK gas market, understanding the evolving situation in Australia is paramount. 

While the immediate price impact might be negligible, the potential for future volatility cannot be ignored. As the northern hemisphere gears up for winter, any disruption in LNG supplies could have cascading effects on pricing and availability. 

At this juncture, all eyes are on the mediation talks, with the hope that a resolution can be reached, ensuring stability in the global gas markets. 

At NGP, our expertise and market intelligence achieve long-term stability for your energy costs, helping to secure the future for your business. We have helped thousands of businesses navigate the energy crisis, giving budget certainty and a plan to move forward.

We understand that the energy market is notoriously sensitive to supply shocks and is influenced by global events. Our team of experts keeps a close eye on these factors, providing businesses with the market intelligence and real-time data they need to make informed purchasing decisions.

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