Australia's FWC dismisses bid by INPEX to halt strike at Ichthys LNG

Australia's Fair Work Commission on June 14 dismissed INPEX's application seeking to suspend strike action at its operated Ichthys LNG facilities, despite the possibility that production could stop before the strike notification period ends on June 23.

FWC Deputy President Michael Easton, in his reasons for the decision published online June 15, said, "I am not satisfied on the evidence that a full stoppage of production would damage the Australian or NT (Northern Territory) economy, at least not to the magnitude claimed by INPEX."

"There is no evidence that the Australian or the Northern Territory economies will lose any export revenue because of these threatened stoppages," Easton said.

The ruling follows a hearing on June 13 after INPEX filed an application to suspend protected industrial action at the Ichthys LNG sites.

The protected industrial action by Australian unions, including the Offshore Alliance -- a partnership between the Australian Workers' Union and the Maritime Union of Australia -- began on May 27, with more significant forms of protected industrial action starting from June 11.

"Central to INPEX's application is the possibility of a full stoppage of production, which, it is said, will cause damage to the economy and/or endangerment to part of the population," Easton said. "I am satisfied that the bans on loading could have the effect of creating a situation that causes production to stop entirely."

Zero ships

No LNG ships were moored at the Ichthys LNG terminal as of 1012 GMT on June 15, after the Archy Vanguard departed the terminal near Darwin at 0752 GMT on June 11 following its arrival at 0221 GMT on June 10, according to S&P Global Commodities at Sea data.

"On the evidence, it seems very unlikely that INPEX could extend production to the end of the notification period (23 June 2026), and so it is necessary to assume that at some point between 16 and 23 June 2026, the project will reach tank top and production will shut down," Easton said. "Thereafter, INPEX will not supply domestic gas to PWC (Northern Territory's Power and Water Corp.)'s nearby storage facility."

Easton said that, assuming INPEX takes no steps to slow the flow through the relevant tanks, the earliest point at which the onshore facility would reach tank top is June 16.

He added that INPEX has options to delay reaching tank top, including controlling the flow rate from the seabed, managing flow rate and pressure in the 890-kilometer pipeline and/or adjusting flow rates onshore.

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

"Shipments at Ichthys are suspended at the moment, but Japanese utilities remain optimistic," a Japanese trader said.

A Japanese buyer of Ichthys LNG said, "We haven't received detailed information from Ichthys, but if [the strike] continues longer, it will affect market prices."

"We are likely seeing the [supply] impact of the [Ichthys] strike," a source at a Japanese utility said.

A European utility source said, "The request to stop the strike was rejected. I think we will see the impact from now on. Most buyers are Japanese utilities, and I expect them to procure alternative cargoes."

Potential ramifications

INPEX Senior Vice President Corporate Bill Townsend, in a statement sent to Platts, part of S&P Global Energy, on June 14, said, "INPEX acknowledges the Fair Work Commission's ruling today not to terminate protected industrial action at the Ichthys LNG facilities."

"This is a disappointing outcome, but the Fair Work Commission and the unions are now on notice of the potential ramifications of the planned industrial action," he added.

While confirming the protected industrial action at Ichthys LNG will continue until June 23, Townsend said, "We are planning accordingly to mitigate impacts while maintaining safe and stable operations."

"Reaching an equitable and sustainable agreement with employees is a priority. At the same time, we are committed to maintaining safe operations at Ichthys LNG and to ensuring a reliable energy supply amid ongoing global market disruption," he said, adding that an updated offer is being prepared (or has been prepared), following continued interest-based bargaining.

Brad Gandy, AWU WA branch secretary and Offshore Alliance spokesperson, in a statement sent to Platts on June 14, said, "There is no surprise that INPEX, a multinational that extracts Australian gas and sells it to other countries without paying any tax on it, has failed to convince the Fair Work Commission that industrial action taken by Offshore Alliance members will have a significant impact on the Australian economy."

"Offshore Alliance members form the entire operation at INPEX, and according to the industry lobby group, the gas produced by INPEX performs an important geopolitical function, especially during the current energy crisis," Gandy said. "This is exactly why the workers who keep the facilities running deserve to have security in their employment and be paid accordingly."

The Offshore Alliance, in a Facebook post on June 15, said, "PIA is continuing, and a further notice of extending PIA past 23 June will be sent to INPEX this afternoon."