LNG exporters to benefit from Australian strike

Chevron

• Workers down tools at two facilities
• Supply threat pushes up gas prices
• Qatar could pick highest bidder

Strike action by Australian liquefied natural gas (LNG) workers will offer rival producers in the Gulf the opportunity to gain long-term market share, especially in Asia and Europe, as pressure is put on already tight global supplies.

Hundreds of workers at Chevron’s Wheatstone and Gorgon LNG facilities in western Australia downed tools on Friday after negotiations with management failed to agree a deal on a dispute over working conditions.

Australia is the world’s biggest LNG exporter, ahead of the US and Qatar. Workers have decided to extend the industrial action for at least two weeks.

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The threat to supply pushed up British and European gas prices.

“The prices are jumpy, the global energy market is stretched at the moment,” energy expert and author Robin Mills told AGBI. 

Analysts said they didn’t expect major output disruptions in the short term, as both of Chevron’s Australian facilities, which account for 7 percent of global LNG supplies, have stored reserves. However, prolonged strike action will open up opportunities for rival producers in the US and the Gulf.

“Nobody in the LNG business has spare capacity, especially not right now. Everybody is running at maximum capacity,” Mills added.

New LNG projects are not expected to become operational until at least 2026, so the disruption to Australian supply demonstrates the fragility of global supplies, said Matt Stanley, energy expert at data and analytics company Kpler.

Australia shipped out 80.9 million metric tonnes of gas in 2022 and accounted for around 20 percent of global supply. The two Chevron gas plants mainly supply Asian markets – Japan, South Korea, China and Taiwan.

If the strike action continues then Asian customers will begin to look to other suppliers such as the US and Qatar.

The main urgency in terms of supply will be Europe, which is already struggling to replace Russian gas. 

If Asian customers look to the US to replace Australian supplies, then Europe will find its prices rising even higher, Mills said.

“We still have two months to go before Europe starts to draw down its storage,” Mills said.

Increased competition for supply could benefit producers like Qatar, Stanley said, but added that most of the Gulf state’s LNG contracts are long-term deals rather than sold on the daily spot markets.

“So the short-term gas price doesn’t actually really affect them very much,” Stanley said. “However, Qatar is one of the swing producers and may go with the higher bidder.”

Smaller LNG producers like the UAE and Oman could also benefit, he added, but they also face the challenge that the majority of their supplies are sold to Asian customers as part of long-term contracts.

Another benefit is that Qatar will be seen as a more reliable supplier in the long term. “This kind of (strike) will never happen in Qatar,” Stanley said.

Gulf producers will continue to invest in order to sell as much as possible and to continue to gain market strength and the Australian strike action will only help in their bid to overtake them as the world’s top supplier.

“In 10 years time or by 2030 Qatar and the US will supply around 50 percent of the world’s LNG needs,” Stanley predicted.