Chevron lodges intractable bargaining declaration for Wheatstone, Gorgon projects

Australia's labor regulator has received three applications -- B2023/925, B2023/968 and B2023/969 -- for an intractable bargaining declaration lodged by Chevron for the company's LNG facilities in the country, a source at the Fair Work Commission confirmed Sept. 11.

"All three cases are listed before President Hatcher tomorrow ... In terms of how these cases progress -- this is dependent on the presiding Member or Full-bench (if appointed)," the source said.

While the applications for the intractable bargaining declaration for the Gorgon and Wheatstone downstream assets were filed Sept. 11, it is learned that the application for the Wheatstone Platform was filed Sept. 4.

The intractable bargaining declaration provisions were inserted into the Fair Work Act by the Albanese government in June 2023 as a circuit breaker where there is no reasonable prospect of agreement.

According to the FWC website, from June 6, serious breach declarations and bargaining-related workplace determinations were replaced by the intractable bargaining declaration, under which a bargaining representative can apply for an intractable bargaining declaration if the parties have been bargaining for at least nine months (the minimum bargaining period) and have reached an impasse, or under certain other conditions.

A bargaining representative can also apply under this process if the parties have tried to resolve the dispute, including making an application to the FWC under section 240.

In addition, "if the Commission makes an intractable bargaining declaration and bargaining representatives still can't resolve the dispute, the Commission must make an intractable bargaining workplace determination," according to the FWC website.

This determination establishes the terms and conditions of employment in place of an enterprise agreement, the website noted.

Being at loggerheads

A Chevron Australia spokesperson when contacted noted Sept. 11 that "we will seek to have these applications heard with the existing application for the Wheatstone Platform."

"Throughout the process to date, we've made generous, good faith offers and concessions in an effort to finalize Enterprise Agreements," the spokesperson said, noting that while industrial action has started, "Chevron Australia remains committed to attaining an agreement that achieves market competitive outcomes which are in the interests of both our employees and our company."

Meanwhile, a union member at the Offshore Alliance requesting anonymity said late Sept. 8 that he was aware that Chevron would be going ahead with an Intractable Bargaining Declaration.

"We want very clear and unambiguous claims for our workers ... it's about job security" he said, adding "we'll just go ahead and do what we have to do," as the applications progress.

Grappling with supply risks

Any supply disruptions at Chevron-operated Gorgon and Wheatstone LNG projects are being watched closely by market participants as their operations stay critical to maintaining the global LNG supply-demand balance.

Asian spot LNG prices surged over 5% day on day Sept. 8 after news of Protected Industrial Action at the facilities by union members percolated. The Platts JKM for October was assessed at $13.342/MMBtu Sept. 8, S&P Global Commodity Insights data showed.

An LNG industry source in North Asia Sept. 11 said that his company was still gauging the severity of the situation as they planned ahead for potential supply disruptions. However, the source said that he had not heard of any formal communication so far from Chevron on the delay of supplies.

An industry analyst based in Australia noted on the same day that it was "interesting" to see Chevron leave it to the FWC to set the terms of agreement when the workers are generally requesting what is considered industry standard. "It's like giving in without actually giving in," he said.

"The Chevron industrial negotiations are not for the faint-hearted," Australia-based consulting firm EnergyQuest CEO Rick Wilkinson said in a statement separately Sept. 11, noting that they put at risk a third of Australia's LNG exports and almost half of Western Australia's domestic gas supply.

"The daily revenue at risk to Chevron and its partners -- an estimated A$76 million/day [$48.93 million/day] -- means a quick solution is a priority," he added.

Meanwhile, S&P Global reported earlier that Chevron started 'evacuating' contractor workforce from its Australian LNG facilities over the weekend.

The Chevron-operated Gorgon and Wheatstone projects are among Australia's largest resource developments. The Gorgon project comprises a three-train, 15.6 million mt/year LNG facility and a domestic gas plant, while the Wheatstone project has a nameplate capacity of 8.9 million mt/year of LNG and a domestic gas plant.