Workers at Chevron’s Australian LNG Projects Go on Strike
By Emily Chow and Lewis Jackson
In a major development, workers at Chevron’s liquefied natural gas (LNG) projects in Australia, responsible for 5.1% of the world’s LNG supply, have gone on strike after failed mediation talks. This strike could have significant implications for the global LNG market.
The unions have started with short work stoppages and bans on certain tasks, but they plan to escalate to a total strike within two weeks if an agreement is not reached. Workers will stop work for up to 11 hours per day and refuse to perform certain tasks until next Wednesday. If no deal is reached by then, they will completely stop work for two weeks.
No further talks are planned at the moment, and the unions are prepared for extensive industrial action.
Chevron has stated that it will take steps to maintain operations in case of any disruptions, but has not provided specific details.
What Will be the Impact on Price and Output?
Australia was the world’s largest LNG exporter last year, and Chevron’s Gorgon and Wheatstone facilities primarily export to Japan, South Korea, China, and Taiwan. The National Australia Bank (NAB) analyst, Baden Moore, expects some short-term spot price volatility if there is an unscheduled outage, but the duration of the strike will be critical.
Preliminary calculations suggest that the work stoppages until September 14th would remove around 95,000 tons of LNG output from the market. A full-scale strike would have a wider-ranging impact on output.
How Long Will the Industrial Action Last?
Industry experts believe that the risk of a prolonged strike is low, citing the short delays in starting action and the recent resolution of a similar impasse with LNG workers at Woodside Energy Group. The negotiations between Woodside and the unions could provide a benchmark for finalizing terms with Chevron.
What’s at Stake for LNG Markets?
A prolonged strike could disrupt LNG exports and lead to higher prices for the super-chilled fuel, which is used for electricity generation. The recent labor unrest in Australia has already caused volatility in European gas prices.
What’s the Disagreement?
The two sides are in disagreement over issues such as pay, job security, rosters, and rules around overtime and transfers between Chevron facilities. Chevron claims that the unions’ demands go beyond industry standards, while the unions argue that their pay demands are in line with agreements at other LNG facilities.
(Reporting by Emily Chow, Lewis Jackson and Florence Tan; Editing by Tony Munroe and Miral Fahmy)
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What are the potential consequences of a prolonged strike at Chevron’s Australian LNG projects on global LNG prices, particularly in the Asian market?
To a decrease in global LNG supply. This could potentially result in an increase in LNG prices, particularly in the Asian market where Australia is a major supplier.
Australia’s LNG industry plays a crucial role in meeting global energy demand, with Chevron’s projects being a significant contributor. The Gorgon and Wheatstone facilities have a combined production capacity of 29.3 million metric tons per year, making them important players in the LNG market.
The strike by Chevron’s workers is driven by demands for better pay and working conditions. The unions have already initiated short work stoppages and bans on certain tasks, indicating their determination to achieve their goals. If an agreement is not reached within two weeks, they plan to escalate to a total strike, which could have far-reaching consequences.
Chevron has acknowledged the potential disruptions and has stated its intention to maintain operations. However, specific details of their contingency plans have not been provided. It remains uncertain how effectively Chevron can continue production in the face of a prolonged strike.
The impact on LNG prices and output will depend on the duration of the industrial action. Short-term spot price volatility is expected if there are unscheduled outages, but the full-scale strike would have a more significant and long-lasting impact on output. Preliminary estimates suggest that the work stoppages until September 14th would remove around 95,000 tons of LNG from the market. If a full-scale strike were to occur, the effects on output would be even more substantial.
Industry experts believe that the risk of a prolonged strike is low, referring to the quick initiation of action and the recent successful resolution of a similar situation with Woodside Energy Group. The negotiations between Woodside and the unions could serve as a benchmark for reaching a resolution with Chevron.
The implications for LNG markets are significant. A prolonged strike could disrupt Australia’s LNG exports, affecting global supply chains and potentially leading to shortages in certain regions. Given the importance of Chevron’s projects in the global LNG market, their absence would be keenly felt. The impact on prices would depend on how quickly alternative supply sources can make up for the shortfall.
In conclusion, the strike by workers at Chevron’s Australian LNG projects has the potential to significantly impact the global LNG market. The duration of the industrial action will determine the extent of the disruptions and the resulting effects on prices and output. It remains to be seen how Chevron and the unions will negotiate and reach an agreement to avoid further escalation and potential long-term consequences for the industry.
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