Progress in Resolving Australian Gas Labor Dispute
Woodside Energy is making strides in resolving a labor dispute that has had reverberations throughout global natural gas markets. Negotiations are ongoing to reach an agreement on pay and conditions.
Troy D. Hanson
August 22, 2023
Woodside Energy is making significant strides in resolving a labor dispute that has had reverberations throughout global natural gas markets, according to Chief Executive Meg O'Neill. Additional negotiations between Woodside and workers at three offshore platforms are scheduled to take place on Wednesday, with the goal of reaching an agreement on pay and conditions.
Earlier this month, the workers unanimously voted in favor of potential actions, including the possibility of strikes, following a series of unsuccessful talks in which a mutually acceptable deal could not be reached. Woodside's vote significantly increased concerns about a potential drop in liquefied natural gas (LNG) exports, leading to soaring gas prices in Europe and Asia. This surge in prices has sparked fears of a bidding war among European and Asian buyers, who may turn to alternative sources such as the United States.
In response, the Offshore Alliance, a workers group, has announced that its members at Woodside plan to inform the company of a potential strike if they are not satisfied with the outcome of Wednesday's meeting.
The uncertainty surrounding the impact of industrial action continues to unnerve markets, particularly as U.S. energy producer Chevron is also yet to reach agreements with some of its employees in Australia. The European benchmark price of natural gas, known as Dutch TTF, witnessed a significant surge of nearly 9% on Monday, reaching its highest level since mid-June. It is worth noting that prices have risen by approximately 20% over the past two weeks as a result of potential industrial action at facilities operated by Woodside and Chevron, which together constitute over 10% of global LNG supply.
With negotiations scheduled for Wednesday, stakeholders will be monitoring the developments closely, hoping for a successful resolution to the labor dispute that has created unprecedented uncertainties in the Australian and global natural gas markets.
Woodside Reports Record First-Half Net Profit
According to Woodside CEO, Meg O'Neill, the company is engaged in productive and respectful discussions with its workers. No notice of industrial action has been submitted so far. However, the company is prepared with contingency plans in case of any disruptions, although details were not provided.
Woodside recently announced a remarkable first-half net profit of US$1.74 billion, largely driven by the acquisition of assets from mining giant BHP. Despite weaker oil and gas prices, the company's revenue increased by 27% to US$7.40 billion, thanks to higher production compared to the same period last year.
Citi analysts suggest that potential strikes might not have a significant impact on Woodside's production. However, if there is an impact, the bank anticipates government pressure in Western Australia to prompt Woodside to prioritize domestic natural-gas supply over fulfilling LNG contracts.
Citi further pointed out that Woodside might have the option to choose which contract counterpart does not receive its cargo if LNG contracts are affected. The bank emphasized that different contracts have various clauses, ranging from making up any missed cargoes at a later date to purchasing LNG from the spot market to fulfill contractual obligations.
Regardless of potential earnings impacts, Citi believes that higher spot LNG prices, which favor Pluto, another Woodside-operated LNG facility, could partially offset any negative financial effects.