Chevron rolls the dice on Fair Work arbitration after reaching impasse with unions

The energy giant will use an untested legal approach to end strikes that have spooked gas markets and stoked fears of another energy crisis that could drive further inflation.

Chevron has applied to the Fair Work Commission for arbitration after determining that there is little hope of securing a deal with unions to end strikes that threaten about 7 per cent of the world’s LNG supplies.

European gas prices jumped a further 6 per cent on Monday after a 13 per cent increase on Friday as industrial action began at Chevron’s Gorgon and Wheatstone projects – stoking concerns about the prospect of another energy crisis that could drive more inflation.

Although Chevron insists the short strikes have not had any impact on production, the stoppages will be extended to average about 10 hours a day next week. Unions said that by September 14, there will be two weeks of 24 hour strikes.

With little hope of striking a deal, Chevron said it has requested the Fair Work Commission make so-called intractable bargaining declarations for the Gorgon and Wheatstone downstream facilities. Chevron has already made similar requests in relation to its Wheatstone platform.

The unions and Chevron have ­failed to reach agreement on a range of issues including pay, job security, rosters, transfers to other Chevron work sites, training standards and travel arrangements.

Should the Fair Work Commission agree to the request, the independent authority will rule on the remuneration requests of unions, eventually ending strikes that analysts say would have a significant impact on global supplies of LNG.

A Chevron Australia spokesman said the company was making the move after receiving unreasonable demands from unions, with little prospect of striking a deal.

“Throughout the process to date, we’ve made generous, good faith offers and concessions in an effort to finalise enterprise agreements. Unfortunately, following numerous meetings and conciliation sessions with the Fair Work Commission, no agreement has been reached as the unions are asking for terms significantly above the market,” the spokesman said.

“Given we consider there is no reasonable prospect of agreement, we will now apply for Intractable Bargaining Declarations for Gorgon and Wheatstone Downstream.”

While the involvement of the Fair Work Commission will eventually resolve the industrial action, it will not prevent ongoing strikes until a ruling has been given.

An LNG carrier departs Chevron’s Wheatstone facility.

Offshore Alliance, a coalition of two unions, said on Saturday it was “bunkering down for a long dispute” and said the US oil and gas giant should prepare for “losing billions of export revenue”.

The threat of a protracted stand-off has the market on edge.

Rick Wilkinson, the chief executive of the consultancy EnergyQuest, said the industrial action posed a significant threat to the global market, most notably buyers in Japan and domestically.

“The Chevron industrial negotiations are not for the faint-hearted. They put at risk a third of Australia’s LNG exports and almost half of Western Australia’s domestic gas supply. The daily revenue at risk to Chevron and its partners – an estimated $76m per day – means a quick solution is a priority,” Mr Wilkinson said.

“Japan, as Australia’s largest buyer of LNG, now has 16 per cent of its national LNG supply caught up in one industrial dispute in Western Australia.”

European buyers fear they will face heightened competition from Asia, which will push up prices ahead of winter, a critical period for the region.

Soaring global gas prices were a critical driver of Europe’s fuel crisis, when governments were forced to impose a cap on bills amid warnings thousands of people would be driven into poverty.

Domestic shortfalls will be extremely concerning for WA, which uses significant quantities of gas in electricity production.

WA has in recent months endured a chaotic period with a spate of coal power station outages and an uptick in demand.

A spokesman for WA Energy Minister Bill Johnson said the state government was watching the situation closely, but had not yet seen evidence of any supply disruptions.

The intractable bargaining declarations were enacted by the Albanese government in June 2023 as a “circuit breaker” where there is no prospect of agreement.

Legal experts say they have not yet been fully tested.

Originally published as Chevron rolls the dice on Fair Work arbitration after reaching impasse with unions