Gas prices spike as strikes begin at Chevron

Gas prices in Europe jumped nearly 10 per cent after strikes begun at Chevron’s Gorgon and Wheatstone projects, and industrial action is set to intensify.

First Chevron Wheatstone LNG cargo departs for Japan.

Workers at Chevron’s Gorgon and Wheatstone projects began strikes on Friday after the LNG giant failed to reach a deal with unions, sending gas prices up nearly 10 per cent.

Soaring gas prices will heighten concerns about another energy crunch that was a key trigger in inflation soaring globally.

Unions had postponed planned industrial action earlier in the week, heightening hopes that a deal could be struck - but Chevron and the unions on Friday talks had failed to yield an agreement and industrial action would begin.

At 1pm WA time, approximately 500 workers from the Offshore Alliance stopped work for three hours at the Wheatstone and Gorgon onshore plants. Stikes on the Wheatstone platform were held for one hour.

Strikes, however, will be extended to average approximately 10 hours a day next week. By September 14, unions said there will be two weeks of 24-hour strikes.

Peter Carter, WA branch secretary at the Electrical Trades Union, which is part of the Offshore Alliance, pointed the finger of blame at Chevron.

“Throughout these negotiations, Chevron‘s unwillingness to come to the bargaining table and present a decent offer has wasted the time of everyone involved. Their attitude shows a complete disregard for the process to reach a fair and mutually beneficial agreement. By waiting until the last moment to make an offer, Chevron has created unnecessary tension and frustration,” said Mr Carter.

A Chevron Australia spokesman said the Chevron had hoped to strike a deal, but the company is pushing ahead with plans to minimise any disruptions to production.

“Unfortunately, following numerous meetings and conciliation sessions before the Fair Work Commission, we remain apart on key terms. The unions continue to seek terms that are above and beyond equivalent terms with others in the industry, including in agreements recently reached,” the spokesman told The Australian.

“We have been advised that industrial action will commence today. We will continue to take steps to maintain safe and reliable operations in the event of disruption at our facilities.”

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

While Chevron insists it will move aggressively to mitigate the impact on production - markets reacted quickly. European benchmark gas prices rose more than 8 per cent in early trade on Friday as they worried about the impact on global supplies.

Australia is the world‘s biggest LNG exporter, and the ongoing dispute over wages and conditions had stoked volatility in gas prices. Gorgon and Wheatstone operations account for about 7 per cent of global LNG capacity, analysts estimate.

Disruptions to supplies at Chevron’s WA facilities will be accurately felt by Asian buyers, with Japan and Chinese companies major buyers. Protracted disruptions would cause them to seek alternative supplies, but global supplies remain extremely tight.

European buyers fear they will be faced with heightened competition as the winter approaches, a critical period for the region which relies on the fossil fuel for electricity generation.

Energy analyst Saul Kavonic, said the initial industrial action would likely have no impact on global supplies but it will begin to have a toll if a deal is not done soon.

“The initial strikes appear lower level, designed to create costs and inefficiencies for Chevron, but not yet impact production materially,” Mr Kavonic said.

“This is part of the unions ratcheting up the pressure on Chevron to make more compromises, and is all part of the negotiation ‘dance’ between the parties.

Originally published as Gas prices spike as strikes begin at Chevron