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Dispute stops cargoes at Shell’s huge floating LNG plant

FINANCIAL REVIEW

Dispute stops cargoes at Shell’s huge floating LNG plant

Angela Macdonald-Smith: Senior resources writer
Updated Jun 28, 2022 – 10.36pm, first published at 9.22pm

Shell’s monster floating LNG project off the north-west coast has cancelled cargoes until at least mid-July amid an escalating industrial dispute, tightening the supply of gas in the already-stretched global market.

Trade unions represented through the Offshore Alliance say Shell has threatened union negotiators with its intention to shut down the facility amid the deteriorating situation.

Australian Workers’ Union national secretary Daniel Walton described the threat as “insane” given the national gas crisis, and said the energy major was trying to bully the nation into agreeing to its “hardline” demands.

However the energy multinational insists it is union bans that are behind the likely shutdown, restricting its ability to operate the complex facility and offload cargoes. Prelude supplies LNG to the export market, not to Australian energy users.

A Shell spokeswoman said the group has notified customers that it is cancelling cargoes until at least the middle of next month due to the impact of the industrial action.

The dispute centres around a new collective agreement under negotiation between Shell and the unions, for workers that industry sources say are paid an average of $250,000-$280,000, and in some cases more through bonuses, allowances and overtime.

The Offshore Alliance, comprising the AWU and the Maritime Union of Australia, is pointing to several outstanding issues in the negotiations. It says Shell wants 25 per cent of all employees’ base salaries to be discretionary, meaning that salaries in the enterprise agreement are only guaranteed at 75 per cent, with the rest at the company’s discretion.

It says Shell is refusing to agree to any wage increments over the term of the agreement, and wants to retain the ability to outsource jobs of direct employees to contractors on lower rates of pay.

Workers also want to be paid for delays in Broome or Perth during de-mobilisation from the offshore facility, a shorter waiting period for income protection and a full pass-through of two 0.5 per cent super increases in the employer contribution, taking it to 13 per cent.

Shell reasons it is trying to strike a balance between protecting already -generous key employment conditions with unions demands for improved conditions that could increase operating costs at the vessel by $40 million.

The roster system for the project – three weeks on, four weeks off, three weeks on five weeks off – mean workers are off duty for 60 per cent of the year.

Shell on Monday cancelled the mobilisation of a group of contractors due to fly to the vessel as a result of bans introduced by union members. Those include a ban on signing permits at certain times between July 1 and July 7, a ban on restarting processor compressors and steam turbine generators that have tripped, and a ban on refuelling helicopters or unloading certain cargo.

A ban has also been introduced on the mooring of tankers alongside the Prelude vessel at certain hours, restricting Shell’s ability to offload LNG produced at Prelude onto ships for export.

The latest offer Shell has made to workers, which includes increases in allowances for travelling to the vessel, is due to be voted on from July 7, with the result expected from July 11. However, production may have to be shut down before that time.

The threat of a stoppage at the $US12 billion-plus Prelude venture comes just months after the troubled facility returned to production after an outage for four to five months due to safety problems.

The venture has capacity of 3.6 million tonnes a year of LNG, 400,000 tonnes a year of LPG and 36,000 barrels a day of condensate, making it smaller than a typical onshore LNG plant but much bigger than other floating LNG facilities.

It is partly owed by Korea Gas Co, Japan’s Inpex and Taiwan’s CPC, all important buyers of LNG for their respective nations, which are reliant on imports of gas to meet energy demand.

A Shell spokeswoman said the group recognises the entitlement of workers to participate in industrial action, and said the health and safety of its workers is its “utmost priority”.

“We work hard to provide a strong employee value proposition for our employees, which is competitive with industry peers,” she said.

“We continue to engage with our people and their representatives and remain committed to acting fairly, respectfully and transparently at all times during the bargaining process.”

Mr Walton said that if Shell shut down Prelude “it will be because Shell management has decided it’s a good industrial tactic to deploy”.

“It will have nothing to do with necessity,” he said, noting that the union’s industrial action has been approved by the Fair Work Commission and cannot interfere with the fundamental viability of the facility.

Angela Macdonald-Smith writes on the resources industry with a focus on energy, including gas, oil, electricity and renewables. Connect with Angela on Twitter. Email Angela at [email protected]

SOURCE

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