SYDNEY (Reuters) – Workers at Chevron (NYSE:CVX)’s liquefied natural gas (LNG) ventures in Australia initiated strikes on Friday following the breakdown of negotiations, potentially causing disruptions in facilities responsible for more than 5% of the global LNG supply.
The Fair Work Commission, Australia’s industrial mediator, reported that there were no further scheduled talks between the unions and the U.S. energy giant after five days of mediation.
Australia, the world’s leading LNG exporter with Asia as its primary market, is witnessing a wage and conditions dispute at Chevron’s Gorgon and Wheatstone operations, which has contributed to increased gas prices in Europe. Traders are speculating that reduced Australian supplies could heighten competition from alternative sources.
Following the strike news on Friday, European gas prices surged by as much as 12%.
These work stoppages, designed to escalate in the coming weeks, follow a recent deal between domestic producer Woodside (OTC:WOPEY) Energy and the same unions that averted strikes at its nearby North West Shelf LNG facility. This earlier agreement resulted in increased salaries and made it more challenging to hire contractors or adjust rosters.
Chevron spokesperson stated, “Unfortunately, following numerous meetings and conciliation sessions before the Fair Work Commission, we remain apart on key terms.” The company accused the unions of demanding terms “above and beyond” industry standards, without providing specifics.
Brad Gandy, a spokesperson for the Offshore Alliance, expressed frustration, saying, “Chevron are being unreasonable and downright unusual in their behavior.” He called on Chevron to change its approach to resolve the dispute.
The two sides are in disagreement on various issues, including pay, job security, rosters, and rules governing overtime and transfers between Chevron facilities.
Work stoppages, lasting up to 11 hours, are scheduled to continue until Thursday, potentially escalating into a total strike until Sept. 29 if the dispute remains unresolved.
Chevron asserted that it would take measures to maintain operations in case of any disruptions but did not disclose details. The unions cautioned that the LNG plant might have to be shut down “if there are not competent personnel to undertake handovers during work stoppages.”
The potential consequences of the disruption remain unclear. China and Japan are the top two buyers of Australian LNG, followed by South Korea and Taiwan.
Energy analyst Saul Kavonic suggested that the strikes seemed designed to pressure Chevron into reaching a deal rather than significantly affecting production. He noted that a prolonged full shutdown would prompt government intervention to avert an energy crisis in Western Australia.
The strikes, originally planned for Thursday morning, were postponed twice after progress was made in mediated talks.
