European gas prices soar as Australian workers begin strike

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European gas prices jumped on Friday after workers at liquefied natural gas facilities in Australia began strike action, stoking fears of disruption to global supplies.

Prices of TTF, the European benchmark, rose 13 per cent to €34.50 per megawatt hour ($10.8 per million British thermal units) according to LSEG data. The industrial action covers the Gorgon and Wheatstone facilities, which account for roughly 7 per cent of global LNG supply and which are operated by US oil and gas giant Chevron.

Unions say their members will first engage in limited industrial action, stopping work for up to 11 hours. If no agreement is reached by September 14, they plan to stop work completely for two weeks.

Strikes were initially set to take place on Thursday but were pushed back by a day. Offshore Alliance, a group representing two labour unions, said on Thursday that talks spanned the whole week but no deal was reached.

The union members are “seeking remuneration outcomes which align with benchmark industry standards that apply to Chevron’s contemporaries”, the alliance said in a statement.

The escalation is in contrast to the situation at Woodside Energy, which reached an “in-principle agreement on a number of issues’‘ with the alliance in late August. That averted industrial action at its North West Shelf facilities, which account for about 4 per cent of global LNG supply.

Chevron confirmed in a statement that talks had ended without agreement. “We bargained in good faith and sought to reach an agreement that achieves a market competitive outcome,” the US major said. “The unions continue to seek terms that are above and beyond equivalent terms with others in the industry, including in agreements recently reached.”

LNG from Australia, a key exporter of the fuel, rarely makes it directly to European shores. But a possible disruption to global supplies has kept European traders on edge for the past month.

If buyers of Australian seaborne gas in Asia need to hunt for alternatives, then it will pitch them directly into competition with Europe, which has come to rely on LNG after Russia slashed its pipeline gas exports to the region following its full-scale invasion of Ukraine.

So far there has been little sign of that competition happening, with the EU’s natural gas storage more than 90 per cent full and Asian demand not picking up.

“The initial strike action that began today is only limited in terms of LNG supply”, with only one or two cargoes of LNG estimated to be removed from the market, said Tom Marzec-Manser at energy consultancy ICIS.

A two-week strike “would remove around 1mn tonnes of LNG from the market”, he said, adding: “Even as Europe heads into the winter with very high storages, this potential reduction in supply tightens what remains a very finely balanced global gas market.”