Unions escalate strike action at Australian LNG plants, TTF gas lower
Quantum Commodity Intelligence – Workers at Chevron's two LNG processing plants in Australia along with some offshore workers have escalated industrial action from Thursday, which includes plans for full-scale strike bar skeleton crews to ensure supplies for the domestic market.
It was too early to say what the immediate output loss would be, although analysts said the longer the strike goes the greater the impact, with the Offshore Alliance union reviewing what measure to take every 12 hours.
"Strike action at the Gorgon and Wheatstone LNG facilities in Australia is set to escalate from today, putting around 6% of global supply at risk. Chevron is trying to bring an end to strike action by taking the matter to a tribunal with a hearing scheduled for 22 September," said ING in Thursday's client note.
However, the Wheatstone plants suffered a technical hiccup impacting about a quarter of its output, Chevron confirmed Thursday, although it was unclear if it was related to the ongoing industrial action.
According to ING's commodity research, the processing plants have a combined capacity of 24.5mtpa, or over 6% of global supply.
Chevron is currently pursuing measures to block the strike via Australia's Fair Work Commission, although the legislation introduced last year is largely untested.
Risk
Goldman Sachs said in a research note that escalation increases the risk to supplies, but that risk has been mitigated so far with the possibility of a settlement, or government intervention blocking the strikes.
"This is both because of the potentially large revenue losses to Chevron, or because of potential regulatory intervention," Goldman said.
European natural gas futures rowed back Thursday on expectations that initial LNG losses will likely be low, while the prospect of an end to the strike either through a settlement or intervention also weighed on prices.
Benchmark TTF futures for Oct23 closed Thursday around 3.5% lower at €35.521/MWh, although markets remained highly volatile.
TTF had rallied 6% in the previous session on reports that at least one Japanese buyer had been told by Chevron to make provisions for the loss of supplies, while delayed maintenance at the North Sea Troll field and a technical fault at the Freeport LNG export terminal in Texas also lifted European prices.
Europe is highly reliant on LNG imports after losing access to most of its Russian pipeline gas, and seen vulnerable to weather-led demand spikes this winter despite current eurozone inventories reaching around 93% of capacity.
