Australia's Offshore Alliance begins strike action at Ichthys LNG sites: union

The Offshore Alliance trade union said it began strike action at the INPEX-operated Ichthys LNG sites in Australia early June 2, a development that could add to tightening supply in the Pacific Basin.

"Protected industrial action ramps up today on all three INPEX facilities with stoppages of work and work bans," the Offshore Alliance, a partnership between the Australian Workers' Union and the Maritime Union of Australia, said in a Facebook post.

The union said that negotiations over an enterprise agreement the previous week made "significant progress" but "have fallen short on a number of fundamental claims."

In a statement sent to Platts, part of S&P Global Energy, the Offshore Alliance said its members were commencing industrial action across all the Ichthys LNG facilities from 0600 Australian Western Standard Time on June 2 until June 10.

"The strike action includes union members downing tools between 6 am and 8 am and 6 pm and 8 pm, and bans on overcycle, working past 6 am on demobilization day, and swapping between day shift and night shift without at least four weeks' notice from management," the Offshore Alliance said in the statement.

The Offshore Alliance said its members had previously withheld from engaging in strike action due to progress in negotiations, which have been facilitated by Australia's Fair Work Commission.

However, in the first major stumble since entering facilitated negotiations, INPEX failed to provide a timely response and the documentation necessary for the progression of negotiations, it added.

"It was mutually agreed that INPEX would provide this documentation on Friday or Saturday at the latest, and INPEX failed to provide the documentation until 5 pm Monday," the Offshore Alliance said.

"The response from INPEX has been underwhelming and shows that the company is not taking the negotiations seriously," it added. "In addition to the industrial action starting, the union has served another notice on INPEX setting out industrial action from June 11 to June 23."

The union remains committed to negotiating and open to pausing industrial action should INPEX return to genuine bargaining, the Offshore Alliance said.

In an updated Facebook post on June 2, the Offshore Alliance said, "Today's PIA may have been just a shot across the bows, but it's been enough to hold up the Pacific Breeze LNG carrier for 24 hours at [Ichthys] LNG."

An INPEX spokesperson declined to comment on the Offshore Alliance's updated Facebook post.

The Pacific Breeze is moored at the Ichthys LNG terminal near Darwin as of 0929 GMT on June 2 after arriving at 2136 GMT on May 31, according to the S&P Global Commodities at Sea.

Project's response

In a statement sent to Platts on June 2, INPEX Senior Vice President Corporate Bill Townsend said, "INPEX respects the legal right of employees to take protected industrial action as part of the enterprise agreement bargaining process."

"We are committed to engaging in good faith to reach a fair and equitable agreement with employees," Townsend said.

"INPEX remains focused on maintaining safe operations at Ichthys LNG -- and importantly, ensuring reliable energy supply to our key trading partners in the Indo-Pacific region amid disruption to global energy markets," he added.

The Ichthys project currently has a nameplate capacity of 9.3 million metric tons/year of LNG, 1.65 million mt/year of LPG, and 100,000 barrels/day of condensate, with roughly 70% of LNG output destined for Japanese buyers, according to INPEX.

A spokesperson for JERA, which procures 1.54 million mt/y of Ichthys LNG, said June 2, "Depending on the scale of the current strike, if the impact prolongs, it could affect LNG supply to our company, as well as supply and demand and resource prices in the energy market. We are closely monitoring the situation."

A spokesperson for Tokyo Gas, which procures 1.05 million mt/y of Ichthys LNG, said June 2, "We will monitor developments with a view to ensuring stable procurement and stable supply."

A spokesperson for Kansai Electric, which procures 800,000 mt/y of Ichthys LNG, said June 2, "Regarding LNG procurement, we have been proactively diversifying our sources to mitigate risks. Therefore, even if operations at the project are suspended due to strikes, we recognize that there would be no significant impact in the immediate or short term."

"However, we will continue to monitor the situation closely -- not only in this matter but also including developments in the Middle East -- and will work with a sense of vigilance to ensure stable fuel procurement," the spokesperson added.

The industrial action comes as global LNG spot prices remain elevated and volatile as the conflict in the Middle East continues to constrain about 20% of global LNG supply that normally transits the Strait of Hormuz.

Asia-Pacific spot LNG prices rose on June 2, supported by the start of strike action at Ichthys LNG, continued uncertainty surrounding the Middle East conflict, and rising temperatures across Asia.

Platts assessed the July JKM, the benchmark price for cargo delivered to Northeast Asia, at $18.562/MMBtu on June 2, up 22.4 cents/MMBtu from the previous assessment.