Hundreds of workers are slated to strike at two major liquefied natural gas (LNG) facilities in Australia belonging to Chevron starting next week, after unions voted for work stoppages in an ongoing labor dispute.
Offshore Alliance, which represents the Australian Workers’ Union and the Maritime Union of Australia, said it had given the energy giant notice on Monday night of more than “20 types of industrial action, including numerous work bans and complete stoppages of work.”
The boycott will start next Thursday, following an almost unanimous series of votes by union members, according to the alliance, which has a combined 500 workers across Chevron’s Gorgon and Wheatstone facilities.
The two sites are hugely significant. If strikes were to stop production at both facilities for a month, around 7% of global supply would be lost, according to Daniel Toleman, a principal research analyst of global LNG at energy consultancy Wood Mackenzie, who focuses on Asia.
“Asian buyers and Chevron would need to look for alternatives to meet their commitments,” he told CNN.
“If a strike were to go ahead, prices would rise, particularly if industrial action escalates, and it is unclear how long it would last. However, if strikes are called off, prices will likely drop in the near term.”
News of the planned strikes pushed European natural gas prices higher Monday, with the price of Dutch natural gas, the regional benchmark, climbing 8% to €37.6 ($40.7) 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.
But the region has been stockpiling ahead of the winter heating season. As of last Monday, data from the Aggregated Gas Storage Inventory (AGSI) showed that most European countries’ storage was already at 90% capacity, well ahead of an EU target of reaching that level by November 1.
Despite the full tanks, traders have been bracing for potential supply shocks over the past week. Last week, European natural gas prices soared to €42.9 per megawatt hour, “their highest closing level since April” in anticipation of looming industrial action, according to Deutsche Bank analysts.
At the time, traders were worried about two separate strikes: one at Chevron and another at Woodside, a major Australian energy provider. Together, the facilities belonging to both energy firms account for as much as 10% of global LNG production.
But on Friday, union workers announced a deal in principle with Woodside and called off a planned strike.
Impending strike action
Chevron, too, had presented a new offer to workers at its Gorgon and Wheatstone facilities last week. Offshore Alliance said Tuesday it expected the proposal to be “overwhelmingly rejected.”
In a statement, the organization said the proposed compensation that was “lower than some Tier 2 oil and gas operators in Australian waters.”
The group is arguing that a market leader like Chevron (CVX) should align its pay rates with industry peers, such as Shell (SHEL).
Union workers also say they have “not reached agreement on several key claims, including job security, agreed rosters, mutual agreement on transfers to other Chevron work sites,” among other concerns.
“Offshore Alliance members have been consistently disappointed with the company’s approach to negotiations with the union and Chevron not accepting that an industry standard agreement should apply to the work they perform for the company,” it said.
A Chevron Australia spokesperson confirmed to CNN on Tuesday that it had received notice of planned action next week.
“While we don’t believe that industrial action is necessary for agreement to be reached, we recognize employees have the right to take protected industrial action and we will continue to take steps to maintain safe and reliable operations in the event of disruption,” the company said, without specifying how much production may be affected as a result.
“We will also continue to work through the bargaining process as we seek outcomes that are in the interests of both employees and the company.”
Chevron announced a production boost at its Wheatstone site last week, saying its gas plant there would increase daily capacity by 5%.
The company’s facilities are currently responsible for almost half of Western Australia’s gas supply, according to Chevron Australia Managing Director Mark Hatfield.
“The gas we produce is used in the electricity that powers homes and businesses, and supports key industries like mining, minerals processing and manufacturing,” he said in a statement.
Chevron’s dispute with workers comes as it enjoys bumper profits.
Energy prices have soared since Russia’s invasion of Ukraine, helping oil and gas providers such as Chevron achieve record results last year. While this has since abated, its earnings this year are still topping Wall Street forecasts.
— Hilary Whiteman and Tim Lister contributed to this report.
