Mark Thompson and Michelle Toh
CNN
Published Sept. 8, 2023
LONDON -
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.”p
“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 (US$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.
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Juliana Liu contributed to this article.
Reuters September 9, 2023
A view of Chevron-operated Gorgon project on Barrow Island, Australia, as seen in this undated handout image obtained by Reuters on September 8, 2023.
Sept 9 (Reuters) - Chevron Corp (CVX.N) started withdrawing contractor workers from its Gorgon liquefied natural gas (LNG) facility on Saturday, shortly after staff went on strike at two major projects in Australia, a union coalition said.
"Chevron chartered a special flight this morning to Barrow Island to evacuate 50 blue and white collar contract crew off the Gorgon Project," Offshore Alliance said in a Facebook post.
Strikes Begin at Chevron’s Australian LNG Operations After Talks Break Off
The first of the strikes began today at Chevron Australia’s LNG operations sending fears of potential repercussions in the global energy markets as the job actions are due to escalate over the next week. Chevron is one of the world’s largest producers and makes up a large part of Australia’s LNG supply, which is also the largest exporter in Asia.
The Offshore Alliance, which is made up of the Maritime Union of Australia and the Australian Workers Union, delayed the start of the scheduled strike for a day as mediated talks were continuing. Chevron had asked Australia’s Fair Work Commission to become involved in mediating talks this week after the company failed to win support for an Enterprise Agreement it presented to workers without the approval of the union. It was almost unanimously rejected leading to the talks which after five days reportedly also failed.
A company spokesperson told Reuters, "Unfortunately, following numerous meetings and conciliation sessions before the Fair Work Commission, we remain apart on key terms." The company said the unions were demanding terms "above and beyond" others in the industry.
The Offshore Alliance highlights that Chevron is the only one of the major producers that has failed to reach an agreement now that the government has permitted unions to again collectively negotiate contracts. Woodside had also been faced with a potential strike but after marathon sessions going to the deadline, they announced terms for a preliminary agreement last month. The union says it has bargained in good faith on its demands over wages, overtime, work rules, and job security.
Earlier in the week the union filed a notice that detailed its plans to increase the efforts over the coming week. The current strike will last up to 11 hours and in addition, the union can bar members from undertaking specific tasks. After these intermittent actions, the Offshore Alliance said it will start a two-week work stoppage on September 14 at Chevron’s operations.
Currently, no new talks are scheduled with the only thing both sides are agreeing on is that they remain far apart. Last year, the Offshore Alliance held out in a 71-day strike against Shell. Work was stopped on the massive Prelude offshore facility and only restarted in September 2022.
Australia is the primary supplier of gas to much of Asia. China and Japan are the two largest importers followed by South Korea and Taiwan. Chevron has been taking steps to increase output from the Gorgon and Wheatstone operations which are being impacted by the strike. They were already supplying at least five percent of global supply.
Traders fear if it becomes a prolonged job action, Asian buyers might be forced to start bidding against the Europeans who are also large imports from both the U.S. and Qatar. Dow Jones reported that prices on the European markets started up by nine percent this morning with Reuters saying intra-day prices were up as much as 12 percent. The U.S. price started the day up more than two percent.
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