Japanese buyer of Gorgon, Wheatstone LNG told supply to be unaffected by escalating strike: source

Sellers of Gorgon and Wheatstone LNG have told at least one Japanese buyer that their LNG supply will not be affected by the escalating industrial action at the Australian facilities, a source with the Japanese buyer told S&P Global Commodity Insights Sept. 13.

The Offshore Alliance, an alliance between the Australian Workers' Union and the Maritime Union of Australia, started Protected Industrial Action at the Chevron-operated Gorgon and Wheatstone LNG facilities Sept. 8, and has said its members will stop work completely for two weeks from Sept. 14 as part of the PIA.

"We have been told by the sellers that LNG supply will not be affected from the full-scale strike from Sept. 14," said the source, adding that the buyer was yet to take any steps to secure alternative supply.

Another Japanese buyer said however that they had been told by Chevron to maximize efforts to ensure LNG supply.

The first source added that they were considering measures such as making alternative shipping arrangements and additional LNG procurements should the need arise.

Japanese buyers are foundational customers for the Gorgon and Wheatstone projects, which 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.

Japanese LNG lifting volumes account for 30% of Gorgon output and 83% of Wheatstone output, according to S&P Global calculations based on industry information.

To date, there has been no impact on scheduled LNG loadings and Japanese buyers of Gorgon and Wheatstone LNG have yet to procure alternative supplies, according to sources.

One source said that Japanese power utilities do not see "any immediate significant [supply] risk" arising from an escalating industrial action.

But Japanese buyers will be monitoring the developing situation over the strikes closely.

"They are not keen to look for possible alternatives for Australian cargoes, so they are just minimizing their optimization activity and planning to use their own assets to manage for winter," a Northeast Asian LNG importer said.

Chevron Australia was not immediately available to comment.

So far the start of industrial action has had little impact on spot LNG prices in Asia. Platts, part of S&P Global, assessed the October JKM at $13.301/MMBtu Sept. 13, down 2.4 cents on the day.