Chevron’s Australian LNG operations could face 10-hour daily outage as union fight escalates

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  • Unions plan to strike and ban some tasks from September 7
  • Stops to “add inefficiency” to an operations analyst at Chevron

SYDNEY/SINGAPORE (Reuters) – Chevron Corp’s two major liquefied natural gas (LNG) facilities in Australia could face daily shutdowns of up to 10 hours next week after unions on Tuesday threatened labor action in a dispute over wages and conditions.

Chevron’s Gorgon and Wheatstone projects represent more than 5% of global LNG capacity, and news of potential strikes sent European natural gas prices higher.

Workers at the Gorgon and Wheatstone facilities plan to stop working for seven hours in two blocks on Sept. 7, escalating that to 10 hours on Sept. 8 and 11 hours on Sept. 9, according to a document about the planned measures reviewed by Reuters.

The document, which details work disruptions through Sept. 14, said a smaller three-hour outage is planned at the Wheatstone production platform from Sept. 7.

“Members will engage in continued suspensions, bans, and restrictions that will escalate each week until Chevron agrees to our negotiating claim,” the external coalition said in a Facebook post on Tuesday.

“Chevron is set to cost its LNG exports as the (industrial strike) begins to take its toll,” said the coalition, which includes the Australian Maritime Federation and the Australian Workers’ Union.

A Chevron spokesperson declined to comment on the offshore alliance’s latest position, pointing to an earlier statement that the company “will continue to take steps to maintain safe and reliable operations in the event of a disruption.”

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Unions still have the option to call off strikes if their conditions are met. Unions warned last week that the outage could cost Chevron billions of dollars.

A similar action by the same union coalition last year against Shell at the Prelude floating liquefied natural gas site off northwest Australia cost the company nearly $1 billion in lost exports in the two months it took to reach a wage deal.

The September Dutch natural gas contract, which traded up nearly 3.5% on Monday at around €36/MWh before industrial labor news, rose another €2.40 to €38.40/MWh, up 10.4% from Friday.

‘A tougher initial move’

Energy analyst Saul Kavonic said the disruption to the planned work “will increase the inefficiency” of Chevron’s operations and could prevent the projects from maintaining full production.

“Ten hours’ work stoppage,” he said, “is a more draconian preliminary industrial measure than the unions at Woodside have thought of.”

“But it is unlikely that it will affect production to the extent that it will move the dial to global markets.”

He said international energy companies operating in Australia, which cannot make decisions entirely locally, tended to see industrial action escalate more quickly than local companies.

Last week, Offshore Alliance and Woodside (WDS.AX) settled workers’ disputes at the North West Shelf, Australia’s largest LNG facility, after negotiating higher wages, job security, employee-friendly rosters and avoiding industrial strike action.

Australia is the world’s largest exporter of liquefied natural gas, which is mainly used in Asia for power and heating as many countries try to reduce their dependence on coal or oil.

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Concerns about potential industrial actions at the LNG facilities at Woodside and Chevron – which account for a tenth of global supply – have fueled wild price volatility in global LNG markets in recent weeks.

(Reporting by Ringo Jose and Louis Jackson in Sydney and Florence Tan in Singapore – Prepared by Mohamed for the Arabic Bulletin) Writing by Alasdair Ball. Editing by Chris Reese, Shri Navaratnam and Tom Hogg

Our standards: Thomson Reuters Principles of Trust.

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