LNG Market Update

Industrial Action expected to commence at Chevron’s Gorgon and Wheatstone LNG facilities.

100% of workers at Chevron’s Wheatstone platform on 28 August voted in favour of Protected Industrial Action (PIA), after 99% of workers voted the same at the Gorgon and Wheatstone downstream facilities on 24 August. PIA will commence on 7 September and will involve work bans and daily stoppages and will escalate each week. A one-week full shutdown of the 15.6mtpa three-train Gorgon and 8.9mtpa two-train Wheatstone is equivalent to a loss of 469,863t of LNG, or 7-8 cargoes, assuming a 65,000t cargo size. Meanwhile, unions have agreed not to engage in any strike action at Woodside’s North West Shelf facilities while the Australian producer prepares a final draft of the Enterprise Agreement which was due for submission to the Offshore Alliance on 28 August, after its in-principle agreement was approved and endorsed by the unions last week.

The impact that industrial strike action might have on LNG freight rates still remains uncertain. The threat of strikes initially led to a surge in the September and October TTF pricing, thus reducing the contango from September into Q4, and with it, eroding the benefit of floating cargoes within this period, an element which increases tonne-time and utilization and thus tightens shipping. However, fears of industrial action across all Australian projects have generally dissipated or been priced in, and there is an underlying expectation that an agreement will eventually be reached.

Thank you to Kyla Schliebs, Joey Chua & Phillip Tripodakis for this in-depth LNG Market update.

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