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European gas prices surged on Friday following strike action by workers at liquefied natural gas facilities in Australia, raising concerns about global supply disruptions.
According to LSEG data, TTF, the European benchmark, experienced a 14% increase, reaching €34.90 per megawatt hour ($10.9 per million British thermal units). The Gorgon and Wheatstone facilities, which are operated by US oil and gas giant Chevron and account for approximately 7% of global LNG supply, are impacted by the industrial action.
The unions have planned limited industrial action, involving up to 11 hours of work stoppage, with a complete halt in operations for two weeks if an agreement is not reached by September 14.
The strikes were originally scheduled for Thursday but were postponed by a day. Offshore Alliance, an alliance representing two labor unions, announced that talks were held throughout the week, but no deal was reached.
The alliance issued a statement stating that union members are demanding compensation in line with industry standards applied to Chevron’s peers.
This development contrasts with the situation at Woodside Energy, which reached an “in-principle agreement on a number of issues” with the alliance in late August. Consequently, industrial action at its North West Shelf facilities, which represent about 4% of global LNG supply, was averted.
Chevron confirmed in a statement that talks concluded without reaching an agreement. The major US oil and gas company stated that they negotiated in good faith and aimed to achieve a market-competitive outcome. However, the unions continue to seek terms that exceed those agreed upon by others in the industry.
Although LNG from Australia, a major fuel exporter, rarely reaches European shores directly, the potential disruption to global supplies has caused concern among European traders for the past month.
If Asian buyers of Australian seaborne gas need to find alternatives, they will be in direct competition with Europe, which has increasingly relied on LNG after a decrease in Russia’s pipeline gas exports due to the invasion of Ukraine.
Currently, there are no significant signs of this competition occurring, as the EU’s natural gas storage is more than 90% full and Asian demand remains low.
“The initial strike action today has limited impact on LNG supply,” said Tom Marzec-Manser, an energy consultant at ICIS. He estimated that only one or two LNG cargoes would be removed from the market. However, if the strike continues for two weeks, about 1 million tonnes of LNG would be taken out of the market. Marzec-Manser added that despite Europe having high gas storage levels heading into winter, this potential reduction in supply would tighten the global gas market, which is already delicately balanced.
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