By David Winning
SYDNEY–Woodside Energy is making good progress toward resolving a labor dispute in Australia that has jolted natural gas markets world-wide, Chief Executive Meg O’Neill said in an interview.
More negotiations between Woodside and workers at three offshore platforms that feed the North West Shelf liquefied natural gas facility in Western Australia are due to take place on Wednesday in an effort to reach agreement on issues around pay and conditions, O’Neill said on Tuesday.
The workers earlier this month voted for potential action, including possible strikes, after months of talks failed to result in a deal. The Woodside vote sent gas prices soaring amid worries of a sudden drop in LNG exports, which could push European and Asian buyers into a bidding war for gas from elsewhere, including from the U.S.
On Sunday, workers group Offshore Alliance said its members at Woodside plan to notify the company of a possible strike should they not be satisfied with the outcome of Wednesday’s meeting.
Markets remain skittish about the impact of industrial action, especially as U.S. energy producer Chevron also hasn’t concluded agreements with some of its workers in Australia. Dutch TTF, the European benchmark price of natural gas, shot nearly 9% on Monday to its highest level since mid-June. Prices have risen roughly 20% in the past two weeks as the Woodside and Chevron operated facilities at risk of industrial action are estimated to account for more than 10% of global LNG supply combined.
“We are having constructive and respectful conversations,” O’Neill said, noting that workers haven’t submitted any notice of industrial action to the company. She confirmed Woodside has contingency plans readied in case of a disruption but declined to elaborate.
Woodside on Tuesday reported a record first-half net profit of US$1.74 billion as the benefit of a full period of ownership of assets acquired from mining giant BHP more than offset weaker oil and gas prices. Its revenue rose 27% to US$7.40 billion as production increased compared with the same period a year earlier.
In a research note, Citi analysts said strikes may not hurt Woodside’s production. If they do, the bank expects government pressure in Western Australia to lead to Woodside prioritizing domestic natural-gas supply over fulfilment of LNG contracts.
“If LNG contracts are impacted, then Woodside may be able to choose which contract counterpart does not receive its cargo,” Citi said.
This is important because each contract may have different clauses, ranging from making up any missed cargoes at a later date to having to buy LNG on the spot market to satisfy contracts, Citi said.
“Regardless, the impact to earnings may be partially offset by higher spot LNG prices which benefit Pluto,” Citi said, referring to another Woodside-operated LNG facility.
Write to David Winning at david.winning@wsj.com
This article was originally published by Marketwatch.com. Read the original article here.
