LNG Strike in Australia Triggers a Surge in Gas Prices

• Financial

Recent strike action at two major liquefied natural gas (LNG) facilities in Australia has seen natural gas prices surge. The disputes, rooted in disagreements over pay and conditions, are unfolding at Chevron's Gorgon and Wheatstone plants, situated in Western Australia.

It's crucial to note that these two plants operated by the US energy behemoth aren’t minor players on the world stage – combined, they represent over 5% of global LNG capacity. Last Friday bore witness to the repercussions of the tension.

Wholesale gas prices in the UK saw a jump of approximately 10%. However, while the figures certainly garnered attention, experts indicate that the situation might not be as dire as some might think. As analysts at Engie EnergyScan commented, "Prices are up this morning… but in a rather moderate way." They pointed out that the market hasn't yet experienced a supply drop and added, "So, no need to panic in a context where all other fundamentals are rather bearish."

Mediation Efforts and Stalled Talks

Behind the scenes, attempts have been made to find common ground.

Australia's industrial arbitrator, the Fair Work Commission, has taken on the role of mediator, trying to facilitate an agreement between Chevron and the Offshore Alliance. This alliance, representing energy workers, is a collaboration between two major unions.

However, these mediation efforts haven't borne fruit yet. A spokesperson from Chevron remarked, "Unfortunately, following numerous meetings and conciliation sessions before the Fair Work Commission, we remain apart on key terms." In contrast, Offshore Alliance spokesperson Brad Gandy lamented that Chevron’s stance had "barely budged" even after a whole week of discussions.

He urged the energy giant to reconsider its position to expedite a resolution.

Broader Impacts on the Energy Sector

The ongoing dispute in Australia emerges against a backdrop of a volatile global energy market. Although wholesale energy costs have decreased since Russia's invasion of Ukraine the previous year, the pressure on prices persists.

This week, oil prices have seen a spike, with Brent crude trading at around $90 a barrel. This follows an announcement that both Saudi Arabia and Russia are extending their reductions in supplies until the year's end. It remains to be seen how long the dispute in Australia will continue, but its ramifications on global gas prices are evident.