Chevron LNG plant in Australia hit by fault as workers set for strike

Chevron’s Wheatstone facility in Australia suffered a fault affecting about a quarter of its liquefied natural gas (LNG) production, a company spokesperson said on Thursday, the same day that workers were set to escalate strike action.

“The cause has been identified and restart activities have commenced,” the spokesperson said, adding that domestic gas facilities were unaffected.

It was not immediately clear whether the fault was related to the strikes, which have been taking place at Wheatstone and Chevron’s other LNG plant, Gorgon, for the past six days after talks between the company and unions over wages and work conditions broke down.

The strikes have increased the risk of disrupted output from the facilities, which account for more than 5% of global supply.

On Thursday, a union representative said workers were planning to escalate industrial action to anything from a total strike to hours-long work stoppages, and would review what action to take every 12 hours.

Research group EnergyQuest estimates that revenue at risk for Chevron and partners from the strikes at about A$76m (R927.5m) a day, though it said not all of that would be lost as some cargoes may be deferred to a later date.

“There is a marked escalation of protected industrial action today, however, it is in various one-hour blocks,” said the union official, who declined to be identified because he isn’t authorised to speak to the media.

Domestic supplies will not be affected, the union said.

Chevron had said it would continue to take steps to maintain operations if any disruptions occur, but didn’t give details.

Australia is the biggest LNG exporter and its main buyers are in Asia. Traders expect any cuts to supplies would send Asian buyers competing with Europeans for cargo, spurring spot price volatility in the European gas market.

Dutch and British wholesale gas prices rose slightly on Wednesday before the strike escalation.

Supply risks

In a bid to stop the industrial action, Chevron is pursuing an untested legal strategy and has applied to the Fair Work Commission, Australia’s industrial arbitrator, for an “intractable bargaining” declaration. If granted, it would end the strikes and allow the tribunal to dictate an agreement.

The commission will hold its first, and so far only, hearing on September 22, and a decision is expected soon afterwards.

Goldman Sachs said in a note that any 24-hour strikes would raise supply risks, though chances of a long outage that could fuel a lengthy spike in gas prices were low.

“This is both because of the potentially large revenue losses to Chevron ... and because of potential regulatory intervention,” Goldman analysts said.

Reuters