Gas Prices Jitters As Strikes Start At Major Chevron Australia LNG Projects

Workers at Chevron Corporation's CVX liquefied natural gas (LNG) projects in Australia went on strike on Friday after mediation talks ended without any deal.

Partial strikes began at 1 p.m. Perth time at Chevron's Gorgon and Wheatstone facilities, which accounted for about 7% of global LNG supply last year and around 47% of Western Australia's domestic gas.

Until next Wednesday, workers will stop work for up to 11 hours in several blocks daily and refuse to perform certain tasks. 

If there is still no deal by then, Members of the Offshore Alliance union said they would stop work completely for two weeks starting September 14.

The commencement of industrial action signifies the conclusion of protracted discussions that have left markets uncertain for weeks. 

In early August, labor unions initially hinted at the possibility of strikes affecting both the Chevron installations and those of Woodside Energy Group Ltd WDS. 

Subsequently, Woodside reached a negotiated settlement with its workforce, while Chevron and its employees still find themselves at odds regarding several critical demands.

Chevron's "bargaining performance has been the most inept effort of any employer the union has dealt with in the past five years, and our members have had enough," Bloomberg noted, citing Offshore Alliance's Facebook post.

A prolonged strike could disrupt exports and raise prices of LNG, which is used for electricity generation. European gas prices have been volatile in recent weeks over the labor unrest in Australia.

European benchmark gas futures surged by as much as 11% in response to the news, although they later receded somewhat. This reaction underscores the market's susceptibility, especially after last year's energy crisis.

Dutch front-month gas, Europe's benchmark, traded 5.8% higher at €34.64 a megawatt-hour by 10 a.m. in Amsterdam.

While Europe rarely receives fuel shipments from Australia, reducing LNG deliveries to Asia would intensify competition for other available cargoes.

Price Action: CVX shares are up 0.35% at $167.22 during the premarket session on the last check Friday.