Goldman sees no impact from Australian LNG strikes yet as latest talks fail

Quantum Commodity Intelligence – Industrial action at Chevron's two LNG processing plants in Australia have so far not significantly impacted production, according to a report released by Goldman Sachs Wednesday.

Unions escalated measures to include rolling 24-hour strikes last week and despite only guaranteeing domestic supplies, the action has not had a meaningful impact on LNG output, although a recent technical outage caused some disruption.

"High-frequency LNG data continues to point to normal loadings out of Australia despite a temporary 20% production outage at the Wheatstone LNG export facility last week," said Goldman, adding this suggests little impact so far from the ongoing strike at the Gorgon and Wheatstone export facilities.

The comments came as the latest talks between Chevron and the Offshore Alliance union, mediated by the Fair Work Commission (FWC) tribunal system, failed on Wednesday. The next round is due to take place on 22 September.

However, Goldman believes that should prolonged strikes lead to lost LNG exports, it believes it would likely be only on a short-term basis.

"We maintain our view that Wheatstone and Gorgon export outages, if realized, would not likely be long lasting given that the potentially large revenue losses associated with it to Chevron, the facility operator, would work as an incentive for an agreement to be reached."

Wheatstone LNG output is approximately 8.9 million mt per annum and Gorgon around 15.6 million mt per annum, making up over 6% of global supplies combined.

The Goldman report also noted that the 15 million mt Freeport LNG export terminal in Texas had returned to normal after last week's short outage, but had flagged a warning that this could be a precursor for further industry disruptions.   

"Operational issues such as these cannot be ruled out more broadly this winter given how hard LNG exporters ran their facilities last year to maximize sales into the high global gas prices at the time. This naturally leaves existing LNG export infrastructure more prone to unplanned outages into the next winter."