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The sharp rise in European natural gas prices caused by concerns over potential strikes in Australia is “irrational” and a “clear sign of the fragility of the market”, according to the chief executive of Woodside Energy, one of the country’s largest oil and gas producers.
The prospect of industrial action at sites operated by Woodside and Chevron off the coast of Western Australia has rocked international energy markets over the past week.
Fears of disruption at sites that generate about 10 per cent of global supply sent prices in Europe soaring 40 per cent last week before falling back.
They rose again on Monday by 9 per cent as the Offshore Alliance, representing offshore gas workers, said it would push for industrial action if there was no resolution after talks with Woodside on Wednesday.
Australia’s biggest independent oil and gas producer on Tuesday reported first-half net profits of $1.7bn, up from $1.6bn a year earlier and a record result according to the company. Revenues rose 27 per cent to $7.4bn.
The Offshore Alliance said in a statement that it would not allow Woodside to present a “cupboard is bare” narrative in light of the results.
Meg O’Neill, chief executive of Woodside, told the Financial Times that talks, which have been ongoing since the start of the year, remained “constructive”, despite the increasingly bitter rhetoric.
Workers are pushing for better terms around pay, job security and working conditions. O’Neill said the company was “doing its best” to come to an agreement but also had a duty to protect shareholder interests.
The company has contingency plans to deal with industrial action, but O’Neill said it was still unclear what the union would do. Industrial action could range from moves such as slow operations to a full walkout, according to the company.
O’Neill said the market reaction to the prospect of strikes was “fairly irrational” and a clear sign of its fragility, indicating that the global natural gas market remained “finely balanced” heading into the European winter.
She said the world had improved its preparation for supply disruption compared with 2022, when Russia’s invasion of Ukraine pushed natural gas prices to record highs and stoked fears of blackouts across Europe.
While the natural gas market had become more stable in 2023, the Chinese economy had not “taken off” as some had expected, following the loosening of restrictions put in place during the pandemic, O’Neill added.
However, Chinese buyers had been active in signing long-term natural gas contracts, particularly from US suppliers, a sign of confidence in the country’s long-term economic prospects, she said.
