Shell cancels Prelude shipments amid gas shutdown
The UK giant tells customers it has restricted cargoes for at least the next 10 days due to industrial action at the troubled offshore facility.
Shell has cancelled shipments of liquefied natural gas from its Prelude project to customers in Asia until at least July 21 following an ongoing industrial dispute with workers, adding to an ongoing global energy crunch.
The UK giant confirmed it had notified customers it had restricted cargoes for at least the next 10 days due to protected industrial action at the troubled offshore facility.
A shutdown of the LNG plant, located 200 kilometres off Australia’s north-west coast, was due to take place on Monday night with the global energy operator at odds with unions over a pay claim for several months.
The Offshore Alliance - representing the Australian Workers’ Union and Maritime Union of Australia - first won permission to take protected industrial action – including a ban on “any work to facilitate the side-by-side mooring of tankers or vessels” – from June 22.
The ban on mooring tankers meant storage facilities could not be unloaded, triggering Shell’s decision to suspend production at Prelude so it would avoid hitting capacity limits this week for any of the petroleum products produced at the platform.
The Offshore Alliance blamed Shell’s aggressive tactics for the shutdown and halt on supplies being sent to customers.
“This situation is typical of the long history of inept management at Shell’s Prelude facility. This situation could actually be resolved very easily if management simply drops its strange, hyper-aggressive industrial reactions tactics,” said Zach Duncalfe, Offshore Alliance coordinator.
Unions and Shell have been at loggerheads over a new enterprise agreement for months, with unions pushing for a 30 per cent increase to the allowance given to workers working offshore, to $117,000 a year, and a range of improvements to conditions – and for bans on the introduction of contract workers.
Shell has taken its own pay offer directly to its workers, but 95 per cent of voting employees rejected the deal on Monday.
Spot LNG prices are trading at seasonal records and several major Asian nations including Japan and Pakistan are grappling with the threat of blackouts amid shortages of the fossil fuel.
Shell initially re-started the shipment of LNG cargoes from Prelude in April after an electrical fault forced a shutdown of the vessel in December 2021.
The addition of the plant’s 3.6m tonnes of capacity was well timed given tight global gas markets due to sanctions and restrictions on Russia, the world‘s fourth largest LNG producer, which has sent Asian spot prices climbing in recent months.
Shell owns 67.5 per cent of Prelude alongside Japan‘s Inpex with 17.5 per cent, South Korea’s Kogas at 10 per cent and Taiwan’s CPC with 5 per cent.
Prelude was touted by Shell as the first of a revolutionary line of projects to unlock gas resources previously considered too remote to support development of conventional land-based LNG plants.
However, high costs and technical problems on Prelude dented momentum to sanction additional floating projects.
Shell is one of the biggest players in Australia’s energy sector, operating the QCLNG export plant in Queensland, the Prelude floating LNG project off northern Australia along with stakes in Western Australia’s North West Shelf, Gorgon and Browse LNG ventures and gas business Arrow.
While Shell’s earnings remain dominated by oil and gas currently, it wants to gradually shift the weight of its investment dollars to lower-carbon sources.