Chevron engages in discussions with unions to avoid an Australian LNG strike.

Chevron is currently in crucial negotiations with labour unions representing workers at two major “liquefied natural gas (LNG)” facilities in Australia, on the brink of planned industrial action. Employees are poised to kick off a series of work stoppages starting this Thursday, with their core grievances centred on compensation and working conditions. If their demands go unmet, the looming threat is a comprehensive strike.

The apprehension surrounding these impending work stoppages has recently caused a rise in natural gas market prices. Chevron, a notable U.S. energy giant, manages the Gorgon and Wheatstone plants in Western Australia, which collectively contribute over 5% to global LNG production capacity.

According to energy analyst Saul Kavonic, while lower-level strikes are likely to commence, their impact on global supply might not be significant. However, the potential for full-scale stoppages beginning on September 14th could have profound repercussions for global energy markets. Kavonic cautions that in such a scenario, roughly 6% of the world’s supply could be disrupted, potentially causing price spikes, particularly if these strikes persist into the northern hemisphere winter.

Tim Harcourt, an expert from the University of Technology Sydney, anticipates that the strike won’t be prolonged, largely due to the interventionist approach of the Fair Work Commission in Australian labour disputes.

This development comes on the heels of Russia’s invasion of Ukraine last year, which triggered surges in oil and gas prices, resulting in increased energy expenses for both households and businesses. Although wholesale energy prices have somewhat stabilised, recent events like Saudi Arabia and Russia extending their supply cuts have led to rising oil prices, with Brent crude surpassing $90 a barrel for the first time since November.

Russia’s reduction in natural gas supplies to Europe has prompted countries to seek alternative energy sources, with many turning to LNG to fill the gap. Australia, alongside Qatar and the United States, ranks among the world’s leading LNG exporters, helping to mitigate fluctuations in global energy prices.

LNG, primarily composed of methane or a mixture of methane and ethane, undergoes purification and extreme cooling to around -160°C, converting it into a liquid suitable for transport in pressurised vessels. Upon reaching its destination, LNG is converted back into a gaseous state and used for various purposes, including heating, cooking, and power generation.

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