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Shell to Shut Prelude FLNG Over Industrial Dispute

Shell (SHEL) to Shut Prelude FLNG Over Industrial Dispute

Shell plc SHEL announced that it would not be able to supply liquefied natural gas (“LNG”) cargoes from its Prelude facility to its customers as the company would completely shut down its Prelude FLNG vessel, offshore Western Australia, due to unions’ escalating industrial action, which has now been extended to Jul 21.

The Offshore Alliance, which is made up of 150 union members earning more than $200,000 a year, told Shell that the workers intended to ban mooring tankers, alongside the vessel, as part of their protected action this week. The ban will disallow SHEL from unloading LNG and LPG from its storage tanks, which are anticipated to reach full capacity going forward.

The industrial action, which was started by unions fighting for enhanced pay, has now escalated to a complete shutdown of operations at a time when the global LNG market is already super stretched because of countries moving away from Russian gas following Russia’s invasion of Ukraine and interruptions at other LNG export plants.

The alliance, however, accused Shell of aggressive bargaining tactics and blamed the London-based oil giant for the disruption.

The halt in operations comes as 95% of the voting workers reject Shell’s enterprise agreement offer, regardless of a proposed pay hike of roughly $30,000. The increase involves a lift in workers’ offshore allowance to $119,000 and a rise in the commuting allowance to $10,000. However, Prelude workers are on individual agreements and complain they are paid less than “tier one” companies and that Shell repetitively makes alterations to their conditions without consultation.

Situated in the Browse Basin, Prelude came back into operation in April after being closed last December as a consequence of power failures initiated by a fire. SHEL is the operator of the Prelude facility and owns a 67.5% interest. Other partners in the project include Japan’s Inpex with a 17.5% stake, Korea’s Kogas with 10% ownership and Taiwan’s CPC holding the remaining 5%.

Shell plc operates as an energy and petrochemical company. It explores and extracts crude oil, natural gas and natural gas liquids. Further, it markets and transports oil and gas and produces gas-to-liquid fuels and other products.

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