Workers at Chevron’s liquified natural gas facilities in Australia have begun to walk off the job in a dispute that threatens as much as 7% of global supplies and could add to rising pressure on energy prices.
Talks aimed at resolving the dispute over pay and other issues ended Friday without agreement. The Australian Offshore Alliance described Chevron’s (CVX) bargaining performance as “the most inept effort of any employer the union has dealt with in the past 5 years and our members have had enough.”
“It’s game on, Chevron,” the alliance said in a statement posted on Facebook. The alliance represents 500 workers at the Gorgon and Wheatstone facilities, both off the coast of Western Australia.
The US energy giant confirmed that industrial action, including work stoppages, had begun and that it had taken steps to maintain safe and reliable operations.
“Unfortunately, following numerous meetings and conciliation sessions before the Fair Work Commission, we remain apart on key terms,” a Chevron spokesperson said. “The unions continue to seek terms that are above and beyond equivalent terms with others in the industry, including in agreements recently reached.”
News of the breakdown in talks sent European natural gas prices rising. Dutch gas futures, which serve as a benchmark for the region, climbed 9.8% on Friday to €36 ($38.53) per megawatt hour.
Europe has become much more dependent on global LNG supplies since deliveries of pipeline gas from Russia slumped following its invasion of Ukraine in February 2022, triggering an energy crisis last winter.
The region has been stockpiling natural gas ahead of the upcoming heating season. Storage levels hit 90% of capacity in August, more than two months ahead of a target date set by the European Commission to ensure security of supply through the winter.
And prices have plunged by about 90% since they soared to a record high last August. However, a cold winter that pushes up demand, or a prolonged disruption to global supplies, could push them higher at a time when oil prices are also rising on the back of output cuts by Saudi Arabia and Russia.
“For now, the energy security picture heading into this winter looks better than expected, but it is too early to be complacent,” Ben Cahill and Kunro Irie at the Center for Strategic and International Studies wrote in a report earlier this week.
Australia is one of the world’s leading exporters of LNG, alongside the United States and Qatar, and most of its gas goes to Asian markets. But a drawn-out dispute at Chevron could mean buyers in Asia are forced to go looking elsewhere, driving up competition for shipments that might be headed for Europe.
The two Chevron sites are hugely significant, accounting for approximately 6% of global supply, according to analysts at ANZ.
If strikes were to stop production at both facilities for a month, a slightly greater proportion — around 7% — of global supply would be wiped out, according to Daniel Toleman, a principal research analyst of global LNG at energy consultancy Wood Mackenzie, who focuses on Asia. But it’s a scenario he thinks is unlikely.
“At this stage, the risk of material production loss remains relatively low,” he wrote in a note on Friday.
The Offshore Alliance has said it intends to escalate the industrial action in the coming days, with a total strike due to begin on Sept 14.
— Juliana Liu contributed to this article.
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