Potential strike in Australia sparks global LNG price rise

LNG prices are on the rise globally as workers in Australia, the world's largest LNG exporter, threaten to strike from 7 September onwards over pay-related disputes.

PHOTO: A graphic representation of an LNG Tanker. Getty Images

Workers’ unions at oil and gas major Chevron's Gorgon and Wheatstone LNG facilities, responsible for around 6% of global LNG supply, have served a notice informing the company regarding potential strike action starting from Thursday. However, negotiations between the company and the unions are ongoing, and there is still a possibility that the strikes could be averted.

The news of potential disruptions at the plants has lifted LNG export prices in recent weeks. The possibility of a supply cut comes at a time when there is expected to be an increase in buyer demand for power generation, particularly in Asia, as the winter months approach, according to analysts at ING Global Markets Research.

"This comes at a critical time for the market. Traders are eyeing flows from Norway, Europe’s gas provider, which have slumped to their lowest in more than a year due to seasonal maintenance," ANZ Bank analyst Daniel Hynes says.

The front-month Platts Japan Korea Marker (JKM) contract, an LNG benchmark price assessment for physical spot cargoes, has increased from nearly $10.90/MMBtu ($567/mt) at the beginning of August, to $13.39/MMBtu ($696/mt) now.

“The recent threat of work stoppages at Australian LNG export facilities caused prices in Asia to rise," the Institute for Energy Economics and Financial Analysis (IEEFA) stated in a report.

LNG bunker demand has also grown in recent months, with the fuel being promoted by some as a lower-emission alternative to oil-based marine fuels. Demand for LNG was anticipated to pick up after prices fell below VLSFO at key bunker ports in July, although the recent surge could dampen interest.

By Debarati Bhattacharjee

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