Australian LNG workers’ strike propels gas prices
Industrial dispute at liquefaction facilities operated by Woodside Energy Group and Chevron in Australia led to workers’ decision to embark on strike, boosting gas prices as European buyers fear supply disruption.
Local news reports hold that the planned strike could start as early as next week at five LNG projects, after about 99 per cent of 180 production employees at Woodside’s facilities voted for action.
It was gathered that hundreds of other employees at Chevron’s facilities may join the action which includes indefinite strikes.
Monthly exports from the facilities account for some 11% of global LNG exports, and analysts at RBC warn that the planned strike could lead to possible supply squeeze despite current healthy gas storage levels.
Fellow analysts at CITI also warn that strike at two major LNG export terminals in Australia would have far-reaching impacts, as it would disrupt LNG exports and increase competition in favour of Asians against European buyers.
RBC Capital analysts said in a research note that roughly three-quarters of Australia’s LNG exports go to the big four Asian buyers: China, Japan, South Korea and India, presumably under longer term contracts, and none to Europe.
“The loss of contracted volumes from Australia would likely see countries like China looking into the spot market for replacement cargoes, pushing up not only JKM prices (the Asian LNG benchmark) but also European gas prices in another potential price war, as we have seen today,” the analysts said.
With storage currently 87.7% full, Europe is on track to have storage full by the end of September, before the draw down starts in October.
However, RBC analysts said that an outage due to planned maintenance in Norway, with an estimated 1.5 billion cubic meters (bcm) of production expected to be offline in August and over 2.5 bcm in September, would potentially coincide with the Australian strike and squeeze balances despite healthy gas storage levels in Europe and elsewhere.
“A fear that an outage in Australia could increase demand from Asia buyers for LNG that might otherwise come to Europe, has led to today’s spike in prices,” said Callum Macpherson, head of commodities at Investec.
