Shell To Keep Prelude FLNG Shut Down Over Pay Dispute

Shell To Keep Prelude FLNG Shut Down Over Pay Dispute
Shell's massive Prelude FLNG facility off Australia will remain shut in due to a pay dispute with unions still not being settled.

Shell’s massive Prelude FLNG facility off Australia will remain shut in due to a pay dispute with unions still not being settled.

Shell was forced to shut down the site and told customers it would be unable to supply LNG cargoes for the duration of work stoppages. The work stoppages began on June 10 and no cargoes have been shipped from the site in about five weeks. The protected industrial action was extended until September 1.

Namely, unions are using an April pay deal with Japan's Inpex at its Ichthys LNG operation as a benchmark for talks with other oil and gas majors. Prelude is co-owned by Shell, Inpex, Korea Gas Corp, and Taiwan's state-run Chinese Petroleum Corp. One other bone of contention is the unions' demand that Shell ensures that it will not outsource jobs to contractors at lower rates than they pay their own staff for the same jobs.

In Wednesday’s post on social media the Offshore Alliance, which represents workers from the Australian Workers' Union and the Maritime Union of Australia, said that it was in its 70th day of Protected Industrial Action in its campaign for job security and Tier 1 rates and conditions.

According to the Alliance, Shell has incurred losses of around $1.3 billion in production since the dispute and shutdown began. That means that the losses stand at over $5 million per Prelude employee. Along with this, Shell has canceled the turnaround scheduled to commence in two weeks.

“No company in Australian history has lost so much money in a bargaining dispute. Whatever Shell's Prelude bosses thought they could save by outsourcing permanent jobs to low-wage labor hire contractors has been exceeded 1000 times over in their ideologically bankrupt approach to bargaining negotiations. Our Prelude members have drawn a line in the sand on job security and have this week supported the extension of Protected Industrial Action until our bargaining claims are resolved,” Offshore Alliance said.

Since the very start of LNG production Prelude has not been the luckiest facility around. Namely, the first problem in the facility occurred in February 2020 when an electrical trip caused Shell to shut down production. It was not brought back online until January 2021.

Then, the facility experienced an unplanned event that resulted in a complete loss of power at the facility on December 2, 2021, which led to unreliable and intermittent power availability over three days.

Inspectors determined that Shell did not have a sufficient understanding of the risks of the power system on the facility, including failure of mechanisms, interdependencies, and recovery. That meant that Prelude FLNG would be out for most of the first quarter of 2022.

In late March, Australian watchdog NOPSEMA closed the investigation into the latest issues that caused Shell’s Prelude FLNG facility to halt production, clearing the path for restart. Shell finally resumed shipping liquefied natural gas from the Prelude FLNG facility in April.

Located some 295 miles northeast of Broome, Western Australia, in the Browse Basin, Prelude FLNG, can produce up to 3.6 million tons per annum of LNG, 1.3 mtpa of condensate, and 0.4 mtpa of LPG. Even the very startup was problematic as it shipped its first LNG cargo in June 2019 after several delays.

To contact the author, email bojan.lepic@rigzone.com


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