Potential strikes at three major liquefied natural gas facilities in Australia could disrupt about 10% of global exports of the fuel and deliver a new energy price shock across Asia and Europe.
Workers at Chevron Corp. and Woodside Energy Group Ltd. facilities in Australia have voted to approve industrial action at the North West Shelf, Wheatstone and Gorgon operations, and some walkouts could begin as soon as next week under labor rules.
European natural gas jumped Wednesday by as much as 40% — a move not seen since the early weeks of the Russian invasion of Ukraine last year that upended global supply of the fuel. Benchmark futures also briefly topped €40 a megawatt-hour ($12.80 a million British thermal units) for the first time since June, though they are still down more than 80% from the unprecedented levels hit in August last year.
The spike in natural gas prices in Europe, which rarely receives LNG from Australia, highlights the region’s nervousness about supplies following last year’s crisis that saw flows drop from Russia, traditionally its biggest source of the heating and power plant fuel. It also shows the increased competition for uncontracted LNG with buyers in Japan, China and South Korea.
Strikes that disrupt exports from all three plants for two months — a similar duration as last year’s interruption at Shell Plc’s Prelude floating LNG production hub in Australia — could send prices to €50 for the rest of the northern hemisphere summer and as high as €97 in the winter, according to Goldman Sachs Group Inc. analyst Samantha Dart.
Read more: European Gas Jumps Most Since March 2022 on LNG Strike Vote
“The situation highlights the importance of Australian LNG for global energy security, with even the possibility of a disruption to Australian gas supply causing large price spikes as far away as Europe,” said Saul Kavonic, a Sydney-based energy analyst at Credit Suisse Group AG. “But in all likelihood an accommodation will be reached before it presents a material impact on global LNG supply.”
Shares in Australia’s biggest LNG producers rose Thursday, with Woodside advancing as much as 1.9% by 12:58 p.m. in Sydney while smaller counterpart Santos Ltd. jumped as much as 3.1%. Disruptions aren’t guaranteed to happen and talks between labor unions at company officials are ongoing.
Talks with Woodside were set to continue on Thursday, according to the Offshore Alliance, a union grouping representing the company’s workers.
“Positive progress is being made and the parties have reached an in-principle agreement on a number of issues that are key to the workforce,” the Perth-based company said.
Chevron continues “to engage our employees and their representatives as we seek outcomes that are in the interests of both employees and the company,” the supplier said in a Wednesday statement.
--With assistance from Ruth Liao.