The anticipation of a potential strike at a liquefied natural gas (LNG) facility in Australia has sent shockwaves through European wholesale gas markets, causing prices to surge.
The Offshore Alliance union’s recent warning about the imminent strike at the North West Shelf plant, operated by Woodside Energy Group, has raised concerns about the global supply of LNG and its impact on prices.
The union’s statement indicated that the strike could begin as early as September 2 if no agreement on pay is reached.
This news, coupled with the ongoing geopolitical tensions, has already led to significant fluctuations in gas prices.
According to Bloomberg, benchmark gas prices for the European Union and the United Kingdom surged by approximately 10% on Monday.
The price surge comes in the wake of Russia’s invasion of Ukraine, which initially caused gas prices to skyrocket but later experienced a decline.
Now, the possibility of a strike at the North West Shelf facility has renewed worries about the supply of LNG.
This facility plays a crucial role in Australia’s status as a key global supplier of liquefied natural gas.
The North West Shelf facility is not the only one facing the specter of strike action. Workers at two other offshore LNG facilities—Gorgon and Wheatstone, operated by Chevron—are also contemplating strike action.
The outcomes of the strike votes for these two facilities are expected to be announced on Thursday. Collectively, these three LNG plants constitute around 10% of the world’s total LNG supply.
Ben McWilliams, an affiliate fellow at the think tank Bruegel, has warned that the strikes could have far-reaching repercussions on global LNG prices.
In an interview with the BBC’s Newsday program, McWilliams highlighted the potential consequences of disrupted Australian gas supplies to Asian consumers. If the strikes proceed and Australian gas shipments are curtailed to Asian markets, consumers in those regions might turn to other suppliers, including Qatar, thus increasing competition and affecting prices.
McWilliams further explained that this could trigger a “knock-on effect on prices” that extends beyond the immediate vicinity of the strike.
This concern underscores the interconnectedness of global energy markets and the potential for localized disruptions to have far-reaching impacts.
Australia’s Role and Impending Price Surge
In the aftermath of Russia’s cutback in natural gas supplies to Europe due to the conflict in Ukraine, many countries have sought to diversify their energy sources, with LNG being a prominent alternative. Australia, alongside Qatar and the United States, stands as one of the largest exporters of LNG in the world.
The recent uncertainty surrounding Australian LNG production has led energy analysts to predict a considerable increase in the Ofgem price cap in the coming months.
Cornwall Insight, a research firm, forecasted a potential cap of £2,082.56 for a typical household’s annual energy bill during the first quarter of 2024.
This projection reflects a notable rise from their previous forecast of £1,925.71 for the fourth quarter of 2023.
As the situation surrounding the possible strike at the North West Shelf facility unfolds, global energy markets will be closely monitoring developments, recognizing the potential for substantial impacts on supply chains and pricing dynamics.