Australian LNG Strike Threatens Global Gas Supply as Qatar Recovery Lags
The ongoing strike action at Australian LNG facilities of Inpex is expected to disrupt operations significantly, a senior official at the Japanese energy firm told Bloomberg on Tuesday.
Workers at Inpex’s Ichthys LNG facilities last week voted to escalate the strike action at all three sites to work stoppages of up to 8 hours per day, up from 4 hours previously.
“We anticipate imminent disruption to production at both onshore and offshore Ichthys LNG facilities,” Bill Townsend, senior vice president corporate at Inpex, said in emailed comments to Bloomberg.
“In the context of current global fuel supply constraints, the disruption is expected to be significant,” the official added.
The industrial action that started on June 3 has already disrupted some LNG loadings at the Ichthys LNG project in recent days, raising market concerns that supply from Australia, currently the world's second-largest LNG supplier with most Qatari output shut-in, could drop in the coming days and weeks.
Earlier this week, the Australian Fair Work Commission denied Inpex a request to stop the strike at the Ichthys facility that would affect production and exports at the 9.2-million-ton facility.
The disruption to global LNG supply from Australia could add to the price pain for energy importers in Asia, the world's largest LNG market.
Benchmark gas prices in Europe and Asia slumped early this week following the announcement of a U.S.-Iran agreement, but flows from Qatar are yet to resume, pending a safe reopening of the Strait of Hormuz.
Such reopening could begin as soon as Friday, when the U.S. and Iran are expected to sign the agreement in Switzerland. But LNG supply from the Middle East would begin flowing weeks later, if the deal holds and the Strait of Hormuz opens to safe navigation.
State firm QatarEnergy, which halted LNG output in early March, has told its customers that it could restore about 50% of its production capacity within a month after safe navigation through the Strait of Hormuz is restored, sources with knowledge of the plans told Bloomberg on Tuesday. Within two months, Qatar could return 80% of its capacity, according to Bloomberg’s sources.
By Charles Kennedy for Oilprice.com
Australian Regulator Clears LNG Strike
The Australian Fair Work Commission has denied Inpex a request to stop a strike at the Ichthys facility that would affect production and exports at the 9.2-million-ton facility.
According to a Reuters report, the operator of Ichthys had applied to the labor regulator for a suspension of the industrial action amid persistent failure to reach an agreement with trade unions. The WTC, however, sided with the strikers, rejecting the Japanese company’s argument that suspension of normal operations at the LNG platform would affect the Australian economy adversely.
“I do not regard this to be a significant disruption. At least some of the previous production will not be lost as soon as the loading ban is lifted,” the deputy president of the Fair Work Commission, Michael Easton, said, as quoted by the publication.
Workers at Ichthys last week voted to escalate the strike action at all three sites to work stoppages of up to 8 hours per day, up from 4 hours at the beginning of the industrial action. The escalation began on June 11 in a development that could further tighten global gas markets, already tight because of the LNG export disruption in the Persian Gulf.
LNG prices in Asia are 75% higher than they were before the war between the United States and Israel against Iran began at the end of February. Now that the two appear set to make peace, hopes for a quick rebound in gas flows out of the Gulf have been rekindled—but it may be premature.
Qatar's state firm QatarEnergy expects the damage to the Ras Laffan LNG complex, the world's single largest LNG-producing facility, to cost it about $20 billion per year in lost revenue and to take up to five years to repair. This means a full resumption of Qatari LNG flows is highly unlikely, making supply from elsewhere, including Australia, more important for global markets.
By Irina Slav for Oilprice.com
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