Chevron, the US energy giant, is in talks with unions representing workers at two major liquefied natural gas (LNG) facilities in Australia to avert planned industrial action. The workers are demanding better pay and conditions, and if their demands are not met, they plan to escalate to a total strike. The potential strike has already caused concerns in the natural gas markets, leading to price increases. Chevron’s Gorgon and Wheatstone plants in Western Australia account for over 5% of global LNG capacity.
The Fair Work Commission, Australia’s industrial arbitrator, has been facilitating mediation talks between Chevron and the Offshore Alliance, a partnership of two unions representing energy workers. While some lower-level strikes are expected to start, they are unlikely to significantly impact global supply, according to energy analyst Saul Kavonic. However, the situation could worsen if the strikes continue into the northern hemisphere winter, potentially leading to a 6% reduction in global LNG supply and a spike in prices.
Tim Harcourt, an expert from the Institute for Public Policy and Governance at the University of Technology Sydney, does not anticipate a prolonged strike due to the intervention of the Fair Work Commission. He believes that although the strike could have some impact on global supply, it is not yet at a critical stage. Australian industrial disputes tend not to last long, unlike those in the US or UK.
The potential disruption in LNG supply from Australia comes at a time when global energy markets are already facing volatility. Russia’s invasion of Ukraine in the previous year caused a spike in oil and gas prices, resulting in higher energy bills for consumers. While wholesale energy prices have since fallen, recent cuts to oil supplies by Saudi Arabia and Russia have caused oil prices to rise again.
The relevance of Australia’s LNG exports lies in their contribution to global energy prices. Australia, along with Qatar and the US, is one of the largest exporters of LNG. The country’s LNG supplies have helped cool global energy prices by providing alternative energy sources.
LNG, which is methane or methane mixed with ethane, undergoes a cleaning process to remove impurities and is then cooled to approximately -160C, converting it into a liquid form suitable for transportation in pressurized tankers. At its destination, LNG is converted back into gas and utilized for heating, cooking, and power generation.
This potential strike in Australia’s LNG facilities serves as a reminder of the interconnectedness and vulnerability of global energy markets. With countries heavily relying on LNG to fill the energy gap caused by reduced supplies from Russia, any disruptions in major LNG exporting nations such as Australia can have a significant impact on energy supplies and prices worldwide.
As industries and households around the world monitor the developments in Australia’s negotiations and potential strike action, it underscores the importance of diversification in energy sources and the need for effective conflict resolution mechanisms within the labor market.
