By: Reuters – A fault at Chevron’s (CVX.N) Wheatstone facility in Australia temporarily shut about a quarter of its liquefied natural gas (LNG) production on Thursday, the same day that unionized workers escalated strike action.
A Chevron spokesman said the cause of the problem had been identified and the company was working to resume full production.
It was not immediately clear if the fault was related to the strikes, which began six days ago at Wheatstone and Chevron’s other Australian LNG facility, Gorgon, after talks between the company and unions over wages and work conditions broke down.
Faults and outages are not unusual at LNG plants, but the strike action could increase the time it takes to fix them, energy analyst Saul Kavonic said.
“Restarting equipment can be more labor intensive, so it can be more challenging than just maintaining operations amidst a strike,” he said, adding that the lost production “shouldn’t move the dial” for gas markets.
Dutch and British wholesale gas prices were lower on Thursday after rising slightly the previous day ahead of the strike escalation.
The Offshore Alliance, a union group said on social media that a turbine tripped at one of Wheatstone’s two LNG trains, which convert natural gas into liquid.
The trains have a combined capacity of 8.9 million tonnes per annum (mtpa).
Combined with the Gorgon plant, Chevron’s Australian LNG facilities account for over 5% of global supply. Analysts said the strikes posed little risk to supplies, as they are likely to be temporary, and key gas buyers also have plenty of inventory.
“The Australian labour dispute should at best last days or weeks but not months given the common interest of keeping cash flows and remaining a reliable supplier,” said Norbert Rucker, head of economics and next-generation research at Swiss wealth manager Julius Baer.
Workers on Thursday escalated what have been six days of limited strikes of up to 11 hours, and for the next two weeks they could stop work for up to 24 hours each day and refuse to do crucial work, such as loading LNG tankers.
Unions on Thursday said they will vary strikes according to “industrial strategy”, targeting LNG exports in particular.
Domestic supplies will not be impacted, they said.
Chevron had said it would continue to take steps to maintain operations if any disruptions occur, without giving details.
Research group EnergyQuest estimated revenue at risk for Chevron and partners from the strikes at about A$76 million ($49 million) per day, though it said not all of that revenue would be lost as some cargoes may be deferred to a later date.
Australia is the world’s biggest LNG exporter and its main buyers are in Asia. Traders anticipate any cuts to supplies would send Asian buyers competing with Europeans for cargo, spurring spot price volatility in the European gas market.
In a bid to stop the industrial action, Chevron is pursuing an untested legal strategy and has applied to the Fair Work Commission, Australia’s industrial arbitrator, for an “intractable bargaining” declaration which, if granted, would end the strikes and allow the tribunal to dictate an agreement.
The commission will hold its first, and so far only, hearing on Sept. 22, and a decision is expected to be made soon after.
($1 = 1.5571 Australian dollars)
