(Reuters) — Workers at Woodside Energy Group and Chevron's LNG facilities in Australia voted to strike on Wednesday, industry sources and Australian media reported, sending European gas prices higher on concern over supplies.
Collectively, monthly exports from the facilities equate to around 11% of exports globally, according to analysts at RBC, who warned of a possible supply squeeze despite healthy gas storage levels in Europe and elsewhere.
"An actual strike at two major LNG export terminals in Australia would have far-reaching impacts," echoed CITI analysts in a note.
About 99 per cent of 180 production employees at Woodside’s facilities voted for action, including indefinite strikes, and they shall be soon joined by hundreds of other employees at Chevron’s facilities, Australia's Financial Review newspaper reported.
News of the strike, which could start as early as next week at five LNG projects, sent European gas prices to a nearly 2-month high.
Industrial action would disrupt the country's LNG exports and increase competition for the super-chilled fuel, forcing Asian buyers to outbid European buyers to attract LNG cargoes.
RBC Capital analysts said in a research note that roughly three-quarters of Australia's LNG exports go to the big four Asian buyers: China, Japan, South Korea and India, presumably under longer term contracts, and none to Europe.
"The loss of contracted volumes from Australia would likely see countries like China looking into the spot market for replacement cargoes, pushing up not only JKM prices (the Asian LNG benchmark) but also European gas prices in another potential price war, as we have seen today," the analysts said.
With storage currently 87.7% full, Europe is on track to have storage full by the end of September, before the drawdown starts in October.
However, RBC analysts said that an outage due to planned maintenance in Norway, with an estimated 1.5 billion cubic meters (Bcm) of production expected to be offline in August and over 2.5 Bcm in September, would potentially coincide with the Australian strike and squeeze balances despite healthy gas storage levels in Europe and elsewhere.
"A fear that an outage in Australia could increase demand from Asia buyers for LNG that might otherwise come to Europe, has led to today's spike in prices," said Callum Macpherson, head of commodities at Investec.