The potential for a strike at a liquefied natural gas (LNG) facility in Australia has prompted an increase in wholesale gas prices in Europe. The Offshore Alliance union has issued a warning that a strike at the North West Shelf facility could commence as early as September 2 if a pay agreement isn’t reached. Benchmark gas prices for the European Union and the United Kingdom saw an approximately 10% surge on Monday, as reported by Bloomberg. This price escalation follows a period of reduced prices subsequent to Russia’s intervention in Ukraine.
Apprehensions arise from the possibility that strike action at Woodside Energy Group’s North West Shelf facility could disrupt liquefied natural gas shipments from Australia, a prominent global supplier of LNG. Workers at two additional offshore LNG plants, Chevron-owned Gorgon and Wheatstone, are also in the process of voting on potential strikes, with results anticipated on Thursday. Collectively, these three facilities constitute about 10% of the global LNG supply.
Ben McWilliams, an affiliate fellow at think tank Bruegel, emphasized the potential for these strikes to influence global LNG prices. McWilliams stated that if strikes were to proceed and Australian gas supplies to Asia were curtailed, Asian consumers might seek alternatives, such as Qatar, which could lead to competition with European buyers and, consequently, price effects.
In the wake of the conflict in Ukraine, Russia curtailed its natural gas exports to Europe, prompting nations to explore alternative energy sources. Many countries turned to LNG to bridge the energy gap. Australia, alongside Qatar and the US, is one of the world’s major LNG exporters.
Recent uncertainty in Australia’s gas supply has led Cornwall Insight to predict a substantial increase in the Ofgem price cap in January, contributing to higher gas prices. The forecast projects a cap of £2,082.56 for a typical annual household bill during the first quarter of 2024, compared to the £1,925.71 projected for the fourth quarter of 2023.
SOURCE: Ref Image from The Times
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