Gorgon, Wheatstone LNG supply to be unaffected by looming strikes as FWC assists talks

Sellers of Gorgon and Wheatstone LNG have told at least one Japanese buyer that their LNG supply will not be affected by looming strikes from Oct. 19, a source with the Japanese buyer told S&P Global Commodity Insights on Oct. 10, as Australia's Fair Work Commissioner Bernie Riordan is assisting negotiations between the parties.

The move comes as Chevron Australia confirmed Oct. 9 that it received notices of intention to take protected industrial action at its Gorgon and Wheatstone facilities for work stoppages and partial work bans from Oct. 19.

"We have been told by the sellers that LNG supply will not be affected from the Oct. 19 strikes," said the source.

Australia's industrial tribunal Fair Work Commission said Oct. 10 its commissioner was assisting Chevron and the unions to resolve differences over the drafting of the enterprise agreements for the major energy company's Gorgon and Wheatstone facilities.

While declining to elaborate on details as it is "an open case before the Commission," a FWC spokesperson told S&P Global that "we can confirm that Commissioner Riordan is assisting parties."

Platts JKM, the benchmark price reflecting LNG delivered to Northeast Asia, for the November derivatives contract was observed tradeable at $14.2/MMBtu at 3 pm Singapore time on Oct. 10, up from $14.154/MMBtu at the London close on Oct. 9, according to S&P Global data.

The November Platts Dutch TTF was trading at $14.285/MMBtu at 3 pm Singapore time Oct. 10, with the JKM-TFU spread pegged at 70 cents/MMBtu.

Seeking assistance

Chevron Australia sought the assistance Oct. 9 of the FWC commissioner to conclude drafting of the enterprise agreements for our Gorgon and Wheatstone gas facilities, a Chevron Australia spokesperson said Oct. 9.

"Chevron Australia and the unions have progressed all drafting to implement Commissioner Riordan's recommendation, with the exception of a small number of items that the parties interpret differently," the spokesperson said.

"Once we receive the further clarification from the Commissioner, we will be able to finalize the enterprise agreements and provide them to our employees to vote on," the spokesperson said.

The spokesperson said Chevron did not believe industrial action was necessary given that the company was seeking the assistance of the FWC to resolve the small number of outstanding items between the parties.

"We will continue to take steps to maintain safe and reliable operations in the event of disruption at our facilities," the spokesperson said.

The latest move by the unions comes after they called off Sept. 22 an earlier protected industrial action at Chevron's Wheatstone and Gorgon facilities.

The Offshore Alliance had started its PIA at Chevron's onshore and offshore LNG facilities Sept. 8 and had said its members would stop work completely for two weeks from Sept. 14, but on Sept. 22 it endorsed a recommendation from the FWC after the labor regulator intervened.

The OA is an alliance between the Australian Workers' Union and the Maritime Union of Australia.

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.