Sydney/Singapore — Woodside Energy on Thursday reached an in-principle agreement with unions at Australia’s largest liquefied natural gas (LNG) project, potentially averting a disruption to supplies from one of the world’s biggest exporters of the super-chilled fuel.
The agreement caused a sharp fall in Dutch and British wholesale gas prices on Thursday, with the benchmark Dutch September contract shedding 11.5%, after hitting a two week-low earlier.
The project in Western Australia, along with the Gorgon and Wheatstone LNG facilities of Chevron Corp, account for about one-tenth of global supplies.
Both Woodside and the union alliance representing workers at the offshore platforms of its North West Shelf facility announced the initial deal in separate statements after a round of talks both sides deemed positive.
Employee representatives were “supportive of the in-principle agreement” and all members will vote to ratify the deal at 7.30 pm Perth time (1130 GMT), according to a release from the union.
“It’s pleasing that Woodside has made our members a strong offer without industrial action being taken,” union alliance spokesperson Brad Gandy said in a statement.
In its statement, Woodside said it would continue to work with the unions to finalise the agreement.
“Substantial progress was made at talks held on Wednesday and the parties have reached in-principle agreement on a number of issues that are key to the workforce,” it added.
The Woodside workers’ unions had threatened to strike as early as Sept. 2 unless their demands for better pay and conditions were met.
“All indications at the moment look promising that strike action at the North West Shelf will be avoided,” Warren Patterson, head of ING’s commodity research, wrote in a note.
CHEVRON RISK STILL ON
Workers at Chevron’s Gorgon and Wheatstone LNG facilities on Thursday voted to allow unions to call for a strike if necessary, raising the possibility of production shutdowns even as both parties continue to negotiate over pay and conditions.
More than 99% of the 433 workers that voted were in favour of taking action, which could range from refusing to load tankers or vessels with LNG to complete work stoppages, according to a statement from the union on Thursday.
The combined threats had supported LNG prices over the past few weeks, sending Asian LNG sport prices to a five-month high on Friday. The strike would have forced Asian buyers to outbid Europe to attract cargoes.
Asian spot LNG prices remained supported at above $14 per million British thermal units at Wednesday’s close, with traders still cautious about LNG supplies from Australia.
Prices for the next two months and into winter were around 10-15% higher.
Energy analyst Saul Kavonic said there was still a risk of industrial action at Chevron’s facilities, but it was unlikely to significantly disrupt supplies.
EU gas storage levels are 91.6% full and the removal of a fight for LNG should soothe markets.
“Last week shows just how nervous the market remains and any news can create a repeat,” consultancy Auxilione said in a note.
Reporting by Renju Jose in Sydney and Florence Tan in Singapore, additional reporting by Marwa Rashad in London; Editing by Stephen Coates, Miral Fahmy and Mark Potter – Reuters