The possibility of a strike at the North West Shelf facility, a key liquefied natural gas (LNG) plant in Australia, has resulted in an increase in wholesale gas prices in Europe. It is reported that the Offshore Alliance union has issued a warning stating that the strike could commence as early as 2 September if a pay deal is not reached. As a result of this news, benchmark gas prices for the European Union (EU) and the United Kingdom (UK) have risen by approximately 10% on Monday, according to Bloomberg.
The rise in gas prices in Europe can be attributed to the fear that the strike action at the North West Shelf facility could disrupt the supply of LNG from Australia, which is a major global supplier. This facility, along with two other offshore LNG plants, Gorgon and Wheatstone, make up around 10% of the world’s supply of LNG. In addition, workers at the Gorgon and Wheatstone facilities, owned by Chevron, are also considering strike action, with the results expected to be announced on Thursday.
Ben McWilliams, an affiliate fellow at the think tank Bruegel, has voiced concern over the potential impact of these strikes on global LNG prices. McWilliams explains that if the strikes proceed and Australian gas supply to Asian consumers is disrupted, these consumers may turn to alternative suppliers such as Qatar, creating competition with European buyers. This competition could lead to increased prices and a knock-on effect across the industry.
These developments come after Russia’s invasion of Ukraine, which resulted in a decrease in natural gas supplies from Russia to Europe. As a result, many countries have been seeking alternative sources of energy, with LNG being a popular choice. Australia, alongside Qatar and the United States, ranks among the largest exporters of LNG in the world.
The uncertainty surrounding Australian gas supply has prompted Cornwall Insight to predict higher gas prices, which will likely contribute to a significant rise in the Ofgem price cap in January. The forecast suggests that the price cap for a typical annual household bill could reach £2,082.56 for the first quarter of 2024, as opposed to the previous forecast of £1,925.71 for the fourth quarter of 2023.
In conclusion, the potential strike at the North West Shelf facility in Australia has sparked concerns about the global supply of LNG and its impact on gas prices. The uncertainty surrounding Australian gas supply is causing prices to rise in Europe, as alternative sources and competition may lead to increased costs. This situation is expected to result in higher energy bills for consumers in the future.
