Natural gas prices have spiked again this week, just as Europe prepares for the heating season.
The price of Dutch natural gas, the European benchmark, has jumped 24% to €40 ($44) per megawatt hour since Tuesday on news of potential industrial action at liquefied natural gas (LNG) plants in Australia. US natural gas prices have climbed 18% so far this month.
The Offshore Alliance, which represents two Australian labor unions, has taken steps toward strike action at Chevron (CVX)’s Gorgon and Wheatstone LNG sites, Brad Gandy, a spokesperson for the alliance, said in a statement. The unions’ demands include better job security and training, and higher pay.
In addition, the unions’ members on offshore gas platforms in the North West Shelf region, owned by Woodside Energy Group, have voted overwhelmingly in favor of strikes, the Offshore Alliance said on Facebook.
If the strikes go ahead, as much as 10% of global LNG production could be shut down, according to Tom Marzec-Manser, head of gas analytics at ICIS.
“Even though Australian LNG hardly ever is shipped to Europe, the loss of the supply would cause a domino effect,” he told CNN, noting that Asian buyers who would be left short would pull cargoes away from Europe.
After Russia — once Europe’s biggest gas supplier — invaded Ukraine last year, the continent raced to find new sources of the commodity, ramping up imports of pipeline gas from Norway and of LNG, mostly from the United States and Qatar. Europe’s success in filling the gap left by Moscow has helped pull natural gas prices down from a record high of around €300 ($331) per megawatt hour hit in August last year.
‘Bidding war’ for US gas?
Bill Weatherburn, commodities economist at Capital Economics, said that if Australian LNG exports were disrupted, Asian and European buyers could find themselves “in a bidding war” for cargoes.