Australian LNG Strikes Pose Risk to Global Supply
North Asian liquefied natural gas (LNG) buyers are not yet taking measures to address potential supply disruptions caused by upcoming strikes in Australia. China and Japan, key purchasers of Australian gas, currently have sufficient inventories as they enter a period of weaker demand between summer and winter. Traders also believe that a resolution with the unions will be reached before strikes significantly impact output.
Unions at two of Chevron Corp.’s LNG export plants in Australia have threatened to halt work starting from September 7 if no agreement is reached on pay and conditions. Although initial industrial action may not immediately affect production, prolonged strikes would increase the risk of disruption. These two plants accounted for around 7% of global LNG output last year.
This threat to supply has sent shockwaves through global gas markets in recent weeks, resulting in surging prices followed by sharp declines with every development. Traders, particularly in Europe, have been concerned that export disruptions could tighten global supply, leading to a bidding war between Asia and Europe for shipments of this essential power-station and heating fuel.
Despite these worries, there has been limited spot buying interest across North Asia. Japan’s LNG inventories have risen in the past week and are in line with the five-year average. Additionally, China’s stockpiles at import terminals could reach 90% of storage capacity in the coming month, according to Qingneng Consultant’s report earlier this month.
However, if Chevron’s Gorgon and Wheatstone projects are forced to cancel or delay shipments under long-term contracts, it is expected that North Asian buyers will increase spot purchases. At present, it remains unclear when or if the LNG exports will be impacted by the strikes, as Chevron has not made any adjustments to loading schedules, as reported by traders.
In conclusion, the threat of strikes in Australia’s LNG export industry has raised concerns about global supply. While North Asian buyers currently have sufficient inventories and there are hopes for a resolution with the unions, the risk of disruption remains. It is yet to be seen how these strikes will unfold and if they will impact LNG exports, but the global gas market is closely monitoring the situation.
