Australian workers at Chevron’s liquified natural gas facilities have started going on strike in a dispute that could affect as much as 7% of global supplies and raise energy costs even more.
Friday saw the end of talks aimed at resolving the pay dispute and other issues without reaching an agreement. The Australian Seaward Collusion depicted Chevron’s (CVX) bartering execution as “the most inept effort of any employer the union has dealt with in the past 5 years and our members have had enough.”
In a Facebook statement, the alliance said, “It’s game on, Chevron,” 500 workers from the Gorgon and Wheatstone facilities, both off the Western Australian coast, are represented by the alliance.
The energy conglomerate in the United States confirmed that industrial action, including work stoppages, had begun and that it had taken steps to keep operations safe and reliable.
“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.”
Natural gas prices in Europe increased as a result of the breakdown in negotiations. On Friday, the benchmark for the region, Dutch gas futures, increased 9.8% to €36 ($38.53) per megawatt hour.
Since pipeline gas deliveries from Russia decreased following its invasion of Ukraine in February 2022, which resulted in an energy crisis last winter, Europe has become significantly more dependent on global LNG supplies.
In preparation for the coming heating season, the region has been stockpiling natural gas. Capacity levels hit 90% of limit in August, over two months in front of a deadline set by the European Commission to guarantee security of supply through the colder time of year.
Additionally, prices have decreased by approximately 90% since reaching a record high in August. In any case, a virus winter that pushes up request, or a drawn out disturbance to worldwide supplies, could push them higher when oil costs are likewise ascending on the rear of result cuts by Saudi Arabia and Russia.
Ben Cahill and Kunro Irie of the Center for Strategic and International Studies wrote in a report earlier this week that “for the moment, the energy security picture heading into this winter looks better than expected, but it is too early to be complacent.” They wrote that “for the moment, the energy security picture heading into this winter looks better than expected.”
Australia is one of the world’s driving exporters of LNG, close by the US and Qatar, and the greater part of its gas goes to Asian business sectors. However, a prolonged dispute at Chevron may force Asian buyers to look elsewhere, increasing competition for shipments that may be headed for Europe.
Analysts at ANZ say that the two Chevron locations are very important because they produce approximately 6% of the world’s supply.
According to Daniel Toleman, a principal research analyst of global LNG at the energy consultancy Wood Mackenzie who focuses on Asia, a slightly greater proportion—around 7%—of the global supply would be eliminated if strikes prevented production at both facilities from continuing for a month. In any case, it’s a situation he believes is improbable.
“At this stage, the risk of material production loss remains relatively low,” he wrote in a note on Friday.
The Offshore Alliance has stated that it will intensify the labor dispute in the coming days, with a total strike scheduled to begin on September 14.
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