Quick Bites | Natural gas prices under pressure

Natural gas prices have been more volatile than usual of late. Two forces are moving in opposite directions: labour issues and potential supply disruptions have seen prices shift higher, while effective European storage efforts to safeguard a coming winter shortage have seen prices abate.

Australian unions have given notice they will undertake rolling stoppages and work bans at Chevron’s Gorgon and Wheatstone liquefied natural gas (LNG) projects in Western Australia and escalate their efforts every week in a major threat to global gas supply.

The Offshore Alliance – including the Australian Workers Union and Maritime Union of Australia – served Chevron last week with protected action notices at all three of its west coast facilities, starting on 7 September and covering 500 workers. Stoppages will escalate to 11 hours a day.

The facilities, including the Gorgon and Wheatstone onshore processing plants and the Wheatstone offshore platform, supply about 7% of globally traded LNG.

The market has been on edge during August amid labour disputes in Australia – one of the world’s top producers of LNG – as strikes could limit global supplies during a crucial period as Europe prepares for winter.

Shell suffered a total shutdown that lasted more than two months at its Prelude floating LNG project off WA last year due to the same type of industrial dispute.

Unions are seeking to lock in benchmark industry pay and conditions, control over rosters and restrictions on contractors. However, the threat of strikes has gone further at Chevron than with Woodside LNG platform workers, who withdrew plans to notify industrial action last week after reaching a midnight deal.

Chevron decided to bypass unions at its Gorgon and Wheatstone plants and put its proposed offer to a direct staff vote. A previous attempt to do the same for the Wheatstone platform resulted in a 2% “yes” vote.

The Gorgon and Wheatstone plants are also by far the biggest suppliers of gas to the WA domestic market, and a shutdown would hit several industrial and mining operations across the state. They accounted for 29% and 18%, respectively, of WA domestic gas supplies in the March quarter of 2023, according to figures from energy consultancy EnergyQuest.

Meanwhile, any major bull market in natural gas is currently unlikely given adequate US and European supplies. The odds of an extremely cold northern hemisphere winter are low due to the record warm oceans along with El Niño.

Source: S&P Global Commodity Insights



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