AFR D. Marin-Guzman 11.8.23 said"While none of the LNG from the...

AFR D. Marin-Guzman 11.8.23 said
"While none of the LNG from the three projects is shipped directly to Europe, gas market sources said a cut in cargoes from the world’s biggest LNG exporter would have a knock-on impact in Europe and force gas importers already struggling to replace Russian supplies to outbid buyers in Asia to secure essential energy.

Some suggested an escalation of the situation could prompt an approach from European countries to the Australian government requesting action to resolve the dispute and prevent a potential price war breaking out.

Bernstein Research analyst Neil Beveridge said the removal of the three ventures’ 41 million tonnes of annualised capacity from the global market would be the “worst-case scenario” that would drive a “significant upward spike” in global gas prices.

“The coming few days will be critical,” he said, pointing to Woodside’s track record in managing industrial labour disputes successfully...

The Alliance, representing a workforce on more than $200,000 a year, has said it will wait to see if there is progress in negotiations with Woodside on Tuesday before deciding on notifying action.

Workers at Chevron’s Gorgon and Wheatstone plants have also sought their own strike ballots...

On Thursday, a Woodside spokeswoman sought to assure customers by saying that “as part of normal business planning, we have contingency plans to deal with challenges such as cyclones, pandemics and a range of other potential disruptions”.

“We hope that activating these plans will not be necessary,” she said.

The company did not confirm whether this meant it had a replacement workforce, although industry sources said it would be difficult to get unionised contractors to replace striking workers.

Western Australia Industrial Relations Minister Bill Johnston, who could apply for orders to stop industrial action if it threatens a significant part of the economy, said, “if there was to be industrial action we would respond in an appropriate manner”.

Workplace Relations Minister Tony Burke declined to comment...

“Our members are acutely aware $50 billion was made exporting Australian gas to the world last year and they don’t want to jeopardise that, but Chevron and Woodside are leaving them little option but to take industrial action,” Mr Gandy said.

“The sooner these huge, profitable gas producers approach these negotiations pragmatically and get back around the bargaining table the better.”

Industrial action covered a range of work bans, including refusing to load tankers or vessels with LNG or condensate up to complete stoppages of work.

Between them, the North West Shelf venture, Wheatstone and Gorgon account for just over 41 million tonnes a year of LNG capacity, almost half of Australia’s total LNG export capacity and almost 11 per cent of global supply, according to Bernstein.

Bernstein said a shutdown would be negative for Woodside and other West Australian operators, and for downstream industries exposed to gas, but positive for other LNG suppliers such as Santos, Shell and Inpex. Shares in LNG exporter Santos rose 2.5 per cent on Thursday, while Woodside was up 1.9 per cent.

The threat of a disruption to Australian exports comes with Europe already on edge ahead of the coming northern winter as it seeks sufficient gas supplies to build up storage and help replace imports lost from Russia since the Ukraine invasion.

Last winter the region was saved by unusually mild winter temperatures (my emphases), but analysts warn the risks have not gone away.

Petrol, oil prices rise

Crude oil prices have also risen amid fears of supply disruptions, with Brent crude oil reaching $US87.70 a barrel on Thursday, its highest since January...

Analysts at Citigroup predicted a long-running strike would cause European and Asian LNG contracts for January to double.

However, energy analyst Saul Kavonic said the gas market reaction could be overblown as it was premature to assume a material supply disruption was much more than a low risk.

He pointed to the precedent set by Shell’s Prelude LNG and Inpex Corporation’s Ichthys LNG in Darwin, where the unions largely prevailed, and said the unions were asking for similar terms, so there should be less need to see a repeat of the escalating industrial action seen at Prelude last year.

“There may be some loud public rhetoric and lower-level industrial action to begin with, as the parties test their positions, and Woodside and Chevron test their unique approaches towards union negotiations,” he said.

“But in all likelihood an accommodation will be reached before it presents a material impact on global LNG supply, as the cost impact of the unions’ requests is not huge, and there are now precedents from the Prelude and Ichthys cases.”

Mr Kavonic said the LNG companies needed to tread cautiously, given the political overlay, with the unions having support from the Labor government, and said “this may not be a battle worth fighting too hard”.

Bernstein’s Mr Beveridge also said he believed it was more likely the dispute would be resolved, saying Woodside “has a long history of managing industrial labour disputes successfully”.

But RBC Capital Markets oil and gas analyst Adnan Dhanani pointed to the potential for a “price war” should countries such as China be forced to look to the spot market for replacement cargoes, pushing up prices not only in Asia but also in Europe.

“With Norway having just started another round of planned maintenance ... the two supply disruptions potentially coinciding would likely squeeze balances despite healthy gas storage levels in Europe and elsewhere,” he said ".

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