Australia's Prelude FLNG offtake, gas production set to be disrupted by strike: Shell

Shell's Prelude FLNG facility offshore Western Australia has been hit by an industrial action due to work bans, with the move likely to disrupt LNG shipments from there for at least two weeks and keep Asian spot prices elevated.

The Platts JKM for August was assessed at $38.59/MMBtu June 29, up slightly from $36.29/MMBtu the day before, according to S&P Global Commodity Insights data.

While the initial period of the Protected Industrial Action (PIA) has been managed with minimal operational impact, the extended work bans and stoppages that come into effect from July 1 mean that offtakes will not be able to be safely completed during the period July 1-14, Shell said.

"As per our obligations under the Lifting & Balancing Agreement, lifters were notified on June 28 with Inability to Supply Notices for the impacted cargoes," it said.

In order to avoid reaching tank tops should offtakes continue to be delayed, production has been curtailed to around 34% to manage inventory levels and is based on the assumption of being able to berth a cargo on July 17, sources told S&P Global.

Protected Industrial Action

The latest hurdle to Prelude operations came when union members on Prelude voted in favor of a Protected Industrial Action, or PIA, on the facility in May. Currently, the PIA runs from June 10 to July 14 and comprises 29 specific work bans, including a ban on restarting compressors or steam turbine generators in the event of a trip.

Further, from July 1 until at least July 14, there are a number of additional work bans that will come into effect that include activities relating to facilitating the side by side mooring of tankers or vessels; the landing, departures and refueling of helicopters; and issuing of work permits to contractors.

"Shell recognizes the entitlement of all workers to exercise their rights, including the right to participate in industrial action," a Shell spokeswoman told S&P Global Commodity Insights June 30.

"Now more than ever, customers need access to reliable but also affordable energy supplies – we are committed to negotiating an enterprise agreement in good faith, but at the same time we need to be able to deliver the affordable and reliable LNG supplies our customers need," she added.

The Prelude FLNG facility, located at Browse Basin, has the capacity to produce 3.6 million mt/year of LNG. Shell holds a 67.5% stake, Japan's Inpex holds a 17.5% stake, South Korea's Kogas 10%, and Taiwan's CPC holds 5% stake in the facility.