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Australia LNG Workers Set to Resume Strikes, Heightening Supply Risk

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Australian LNG Workers to Resume Strikes, Raising Supply Risk

Workers at Chevron Corp.'s liquefied natural gas (LNG) facilities in Australia are planning to resume strikes, which could pose a threat to global supply as the Northern Hemisphere approaches its winter heating season.

Union Decision to Resume Strikes

Union members at Chevron's Gorgon and Wheatstone plants have voted to return to walkouts after temporarily suspending stoppages last month. The decision comes as the unions express dissatisfaction with the company's efforts to finalize an agreement on pay and conditions.

Potential Impact on Global Supply

The resumption of strikes raises concerns about potential disruptions to gas supplies from Australia, one of the world's largest exporters of LNG. Prices in Europe and Asia have already experienced volatility during the third quarter due to fears of supply disruptions.
Market Reaction and Potential Consequences
Benchmark gas futures in Europe saw a temporary increase of up to 5.1% in response to the news. While Europe does not directly receive gas from Australia, the market remains sensitive to supply shocks. The region heavily relies on LNG to replace Russian pipeline gas and would have to compete with Asian buyers for global tanker-borne fuel. While previous strikes did not result in missed LNG cargoes, the potential for renewed walkouts adds uncertainty to supply. However, mild weather and full storage sites in Europe, coupled with weak industrial consumption, have helped mitigate the impact on demand. In Australia, unions express concerns about Chevron's commitment to implementing a proposed settlement put forward by the country's labor regulator. Chevron, on the other hand, states that it has engaged meaningfully with staff to formalize an agreement. In conclusion, the decision of Australian LNG workers to resume strikes raises supply risks and adds uncertainty to the global gas market. The potential for disruptions in gas supplies from Australia, combined with market sensitivity and competition for LNG, creates challenges for both consumers and producers in the industry.

Australian LNG Workers Strikes: A Potential Threat to New Businesses

The decision of Australian LNG workers at Chevron Corp.'s facilities to resume strikes could have a significant impact on new businesses, particularly those operating in the energy sector. The strikes, a result of the company's failure to finalize an agreement on pay and conditions, could potentially disrupt the global supply of LNG.

Impact on Global Supply and Market Prices

Australia is a major exporter of LNG, and any disruption in its supply could lead to volatility in global market prices. This was evident when benchmark gas futures in Europe rose by up to 5.1% in response to the news of the strikes. New businesses, especially those in Europe and Asia, could face increased operational costs due to the rise in LNG prices.

Market Sensitivity and Competition

The LNG market is highly sensitive to supply shocks. With Europe heavily relying on LNG to replace Russian pipeline gas, any supply disruption from Australia could intensify competition for global tanker-borne fuel among European and Asian buyers. This could pose significant challenges for new businesses trying to secure a stable supply of LNG.
Uncertainty and Risk
The potential for renewed strikes adds an element of uncertainty to the LNG supply, which could be risky for new businesses. While previous strikes did not result in missed LNG cargoes, the possibility cannot be ruled out. New businesses must therefore have contingency plans in place to mitigate the impact of such supply disruptions. In conclusion, the resumption of strikes by Australian LNG workers could pose significant challenges for new businesses, from increased operational costs and intensified competition to supply uncertainty and risk. It underscores the need for businesses to stay informed about industry developments and have robust risk management strategies in place.
Story First Published at: https://financialpost.com/pmn/business-pmn/australia-lng-workers-to-resume-strikes-fueling-supply-risk
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