By: Reuters – Chevron’s (CVX.N) two major liquefied natural gas (LNG) production facilities in Australia could face disruptions from next week after unions on Tuesday threatened work stoppages in an ongoing dispute over pay and conditions.
Chevron’s Gorgon and Wheatstone projects account for more than 5% of global LNG capacity, and news of the possible strikes sent European natural gas prices surging.
“Members will be p
articipating in rolling stoppages, bans and limitations which will escalate each week until Chevron agrees to our bargaining claim,” the Offshore Alliance said in a Facebook post on Tuesday.
“It’s set to cost Chevron their LNG exports as (the industrial action) starts to bite,” said the alliance that groups together the Maritime Union of Australia and the Australian Workers’ Union.
A Chevron spokesperson declined to comment on the Offshore Alliance’s latest position, referring to a previous statement that the company “will continue to take steps to maintain safe and reliable operations in the event of disruption.”
The union alliance late on Monday said industrial action could start from Sept. 7, but that a strike could be called off if the parties reach an agreement.
A person familiar with the unions’ plans who declined to be named said workers intend to strike for three hours on the first day and progressively increase the stoppage hours until they cease work.
The unions last week warned work stoppages could cost Chevron billions of dollars if workers’ demands are not met.
A similar action by the same union alliance last year against Shell (SHEL.L) at its Prelude floating LNG site off northwest Australia cost the company about $1 billion in lost exports in the two months it took to reach a pay deal.
The Dutch September natural gas contract , which was trading about 3.5% higher on Monday at around 36 euros per megawatt hour (MWh) before the industrial action news, spiked a further 2.40 euros to 38.40 euros/MWh, up 10.4% from Friday.
‘MORE PAINFUL PROCESS’
Energy analyst Saul Kavonic said the unions could start with “lower level strikes” that can lead to minor disruptions to pressure Chevron into a deal. International energy companies operating in Australia, who are unable to fully make decisions locally, tend to see industrial actions escalate more quickly than domestic companies, he said.
A resolution was still likely “without materially impacting global supply but it may prove a more painful process to arrive at than we saw with the Woodside negotiations,” Kavonic said.
Last week, Offshore Alliance and Woodside (WDS.AX) resolved worker disputes at North West Shelf, Australia’s largest LNG facility, after negotiating higher wages, job security and employee-friendly rosters, averting industrial action.
Australia is the world’s biggest exporter of LNG, which is used primarily in Asia for power and heating as many nations attempt to reduce their reliance on coal or oil.
Concerns over possible industrial actions at the LNG facilities of Woodside and Chevron – which account for one-tenth of global supplies – has stoked extreme price volatility in global LNG markets in recent weeks.
