Japanese buyers of Australia's Gorgon and Wheatstone LNG have not ruled out alternative steps to be considered from the Sept. 7 scheduled start of industrial action, market sources said Aug. 29, and are still examining the potential impact on supply before moving ahead to secure spot cargoes.
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"There is no spot [LNG] demand from Japan heard yet," one market source said. "At this moment, stocks look fine and even if there is [a supply suspension], supply looks fine for prompt supply."
Another market source said: "At this moment, all companies are taking a wait-and-see stance and there are no companies that are considering buying spot [LNG] because of the strike."
The move comes as Australia's Offshore Alliance said Aug. 29 that its members will be "participating in rolling stoppages, bans and limitations" as part of its protected industrial action at Chevron's three west coast facilities from Sept. 7.
The Offshore Alliance said it had formally notified Chevron late Aug. 28 that it would start the industrial action, which will "escalate each week until Chevron agrees to our bargaining claims," it said in its Facebook page posted Aug. 29.
In a separate statement Aug. 29, the Offshore Alliance said its "members at Gorgon, Wheatstone Downstream and Wheatstone Platform have each voted almost unanimously in favor of over twenty types of industrial action, including numerous work bans and complete stoppages of work."
Upon receiving notices for protected industrial action, a Chevron Australia spokesperson said Aug. 28 that Chevron did not believe "industrial action is necessary for agreement to be reached," adding that it will "continue to work through the bargaining process."
The news of looming industrial action at Chevron's Gorgon and Wheatstone facilities comes just days after the Offshore Alliance -- an alliance between the Australian Workers' Union and the Maritime Union of Australia -- had reached an in-principle agreement with Woodside Energy on an enterprise agreement covering employees on its North West Shelf offshore platform.
Platts, part of S&P Global Commodity Insights, assessed the October JKM at $13.367/MMBtu on Aug. 29, up 68.6 cents/MMBtu on the day amid the Australian supply concerns.
The Chevron-operated Gorgon and Wheatstone projects are among Australia's largest resource developments. The Gorgon Project comprises a three-train, 15.6 million mt/year LNG facility and a domestic gas plant, while the Wheatstone Project has a nameplate capacity of 8.9 million mt/year of LNG and a domestic gas plant.
The Japanese buyers are foundational customers for the Gorgon and Wheatstone projects, with Japanese LNG lifting volumes accounting for 30% of the Gorgon output and 83% of Wheatstone output, according to S&P Global calculations based on industry information.
While it verifies whether there will be any supply impact at the Gorgon and Wheatstone projects, a number of Japanese buyers said they would consider alternative steps as necessary to ensure their stable LNG procurements.
"We have heard from Chevron that it will maximize its efforts to minimize impact with its BCP [business continuity plan]," a Japanese buyer of Gorgon LNG said.
Another Japanese buyer of Wheatstone LNG said it had not received any explanation from Chevron on the potential industrial action.
"Even in the event of strikes going ahead Sept. 7, any chance of seeing a significant impact on Japan's LNG procurements in the short term is not high given the likelihood of minimizing the impact on actual LNG production initially," said Takayuki Nogami, chief economist at Japan Organization for Metals and Energy Security, or JOGMEC.
Should the strikes last long with escalated actions, it would have greater impact on LNG procurements by Japanese and other LNG end users in search of substitute supply, Nogami said.
Gorgon and Wheatstone LNG together exported around 24.6 million mt of LNG in 2021 and 27.5 million mt in 2022. They have exported around 17.4 million mt of LNG so far this year, according to S&P Global data.
In 2022, around 46% of Gorgon and Wheatstone's LNG exports were sent to Japan, followed by 15% each to China and South Korea and around 14.4% to Taiwan. The remainder went to Singapore, Thailand and India.
So far this year, Japan has accounted for 46.6% of total LNG exports from the Gorgon and Wheatstone projects, followed by China at 15%, Taiwan at 13% South Korea around 9%, Thailand 8%, Singapore 5.3% and the remainder to other Asian countries.