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Shell confirms Prelude FLNG has resumed operations after strike
Labour unions have approved a new enterprise bargaining agreement after a dispute over worker pay on Shell’s Prelude FLNG offshore Australia saw operations halted for several weeks
Shell confirmed the facility’s restart in a statement on its Australian website.
"Cargoes have resumed from Shell’s Prelude floating liquified natural gas (FLNG) facility and production has restarted," the company said.
"This follows the cancellation of Protected Industrial Action after an in-principle enterprise [bargaining] agreement [EBA] was reached with the Australian Workers’ Union and Electrical Trades Union in relation to the Prelude facility on 23 August. The Enterprise Agreement has now been supported by a majority of employees in a formal vote and is expected to come into effect in early October 2022. We are focused on moving forward as a business and delivering affordable, reliable energy to our customers through continued safe, stable production in order to meet the critical global demand for energy security," Shell said.
The Prelude FLNG production facility has only been briefly operational since a 2020 fire forced its closure and difficulties in repairing the facility followed. Shell stopped production at the FLNG unit 11 July as the facility reached its maximum capacity due to working bans related to the strike preventing safe mooring and offtake of LNG.
The strike has also resulted in postponement of a maintenance turnaround, which requires the facility to be shut down, that had been scheduled for September 2022.
The Offshore Alliance workers’ organisation, representing some of the striking workers, posted about the outcome of the vote on the agreement on its Facebook page in early September.
"Offshore Alliance and ETU members on the Prelude FLNG have voted 94% in favour of the new Prelude EBA. An application for approval of the new EBA will now be made to the Fair Work Commission. This will close out the bargaining process after 76 days of industrial struggle. Great work by the Prelude FLNG crew!" the post said.
24 August
An ’in-principle’ enterprise bargaining agreement will be opened to a vote this week by union members working on Shell’s Prelude FLNG offshore Australia.
A statement from Shell confirmed the in-principle agreement reached with the Australian Workers’ Union and Electrical Trades Union.
"Our strong preference was for this to be resolved through an agreement and are confident this was the best outcome for our workforce. We are now focused on moving forward as a business, returning to safe, stable production and delivering affordable, reliable energy to our customers to meet the critical demands on energy security," Shell said.
“The process to formally lift the work bans in place under the Protected Industrial Actions is expected to be completed shortly, which will enable the facility to commence the process to prepare for a hydrocarbon restart. We will work methodically through the stages in this process with safety and stability foremost in mind.”
A post on The Offshore Alliance Facebook page celebrated the ’fight’ by its membership to hold out during a 76-day protected industrial strike action.
"There has never before been an industrial battle in [Australia] where an employer has lost A$1.5Bn in production during an industrial dispute. We said from the outset of this campaign that we would go ‘One Day Longer, One Day Stronger’ to secure our industrial claims, and we weren’t bluffing. We never are," the post said.
The agreement is subject to a vote by Prelude employees and formal acceptance of the proposal is due within a week. Australia’s Fair Work Commission is then required to approve the agreement in accordance with the Fair Work Act.
9 August
A planned maintenance ’turnaround’ for Prelude that had been set for September 2022, when the facility would have been shut down for major maintenance and any work that cannot be performed while the plant is operational, has been postponed.
Shell said rescheduling the turnaround operation would be dependent on when the strike, or protected industrial action work stoppage that is regulated and approved by Australia’s Fair Work Commission (FWC), ends as well as on other factors, including weather conditions and contractor availability.
Shell said it "remains committed to reaching an agreement and working together to find a way forward with our workforce" and safety is the company’s priority.
Shell also said its staff in Australia have kept offshore regulator NOPSEMA updated on the impacts of the ongoing industrial action and would continue to work closely with the regulator.
The Offshore Alliance, representing workers’ unions involved in the protected industrial action, wrote an update on its Facebook page in which it said the FWC had rejected a request from Shell to force a halt to the industrial action to allow the supermajor to prepare for the maintenance turnaround operation.
"On 4 August, Shell filed a S.425 application in the Fair Work Commission seeking an urgent hearing in the FWC for orders which would have suspended all of the protected industrial action which impacts turnaround activities," the Offshore Alliance wrote.
The workers’ representative said an all-day mediation session chaired by the FWC was successful in reducing the remaining bargaining points at issue from seven to three.
"Shell, however, has not yet agreed to job security provision which will prevent them outsourcing the jobs of Shell Prelude employees to low-wage labour hire contractors," the Offshore Alliance wrote.
"Shell did not specify which of our particular actions would impact the turnaround. The Fair Work Commission has this morning dismissed Shell’s S.425 application and protected industrial action on the Prelude continues into its 58th day."
4 August
Union representatives claim Shell has lost US$1Bn as a failure to resolve industrial strike action has resulted in another production halt just three months after LNG cargo operations recommenced.
Offshore Alliance (OA), the joint union representing Prelude FLNG workers striking over terms in a new enterprise bargaining agreement, has claimed the facility could be shut down for several months.
"Shell management have now advised our Prelude members they are digging in for the long haul and will be preparing for Prelude to be shut down for months," the Offshore Alliance wrote in a Facebook post.
The group claim Shell has "missed" six scheduled offtakes of LNG cargo during the weeks of hard-line negotiations and protected industrial action that, according to Shell, brought the Prelude facility to maximum capacity, forcing a production stoppage.
Offshore Alliance said Shell has currently lost US$960M in revenue and speculated a shutdown lasting through Christmas would cost the supermajor an additional US$5.5Bn in gas revenue. This, Offshore Allicance, wrote, does not factor in deferral of a scheduled maintenance and inspection turnaround at Prelude in September and October "by 10 months". OA said Shell will cancel the turnaround if a resolution to the dispute is not reached in the next week.
"Shell is now telling our Prelude FLNG members the turnaround planned to commence in 28 days’ time is ’unlikely to go ahead’ and will be cancelled if the Prelude FLNG dispute isn’t resolved within seven days," Offshore Alliance wrote in a 2 August post.
"Shell reckon it’s already struck a deal with the regulator to continue on without doing the much needed turnaround," Offshore Alliance said.
It is unclear what the impact of a missed maintenance turnaround would be, particularly given Prelude has only operated for a few months after undergoing repairs and clearing safety checks following a fire in 2020.
According to Offshore Alliance, the move would be a health and safety "gamble".
"Shell’s inability to complete the scheduled turnaround may put Shell’s licence to operate at risk, unless NOPSEMA gives Shell the green light to gamble with the health and safety of Prelude workers," the Offshore Alliance wrote.
Shell did not comment on Offshore Alliance’s claims, saying they are not offering a running commentary on the situation.
However, in a quarterly earnings call that saw Shell announce a record quarterly profit of more than US$11Bn, Shell chief executive Ben van Beurden said, "On Prelude, it is a difficult situation and we are working very hard with the unions to resolve this, but ... These are workers who make US$230,000 a year and we offered them a US$30,000 increase in salary – and that is before superannuation and before overtime, and that has been turned down."
"That is disappointing and we are continuing to talk to them to resolve this: we think this needs to be resolved through negotiations. In the meantime, however, we have to discontinue operations because the union strikes, and there is no way we can continue, also from a safety and security perspective. The implications of this are rather unknown and it depends how long it will take."
29 July
In the ongoing dispute between Shell’s operations in Australia and joint workers’ union representatives the Offshore Alliance, Shell has cancelled a previously announced lock-out directed at striking workers.
The reason given by Shell for the cancellation is safety. A Shell representative said pay for workers still doing partial work under the industrial action conditions on board Prelude would "continue to be prorated", reversing the prior decision to cut all workers’ pay and undertake a lock-out at the facility.
“Shell remains committed to reaching an agreement and working together to find a way forward with our workforce," the oil major said.
From background information provided by Shell, the company’s position appears to be that work bans would have to be stopped and operations resumed before Shell will revisit negotiations.
Shell have also claimed unions had highlighted the possibility that, under a lock-out, safety critical work and emergency response activities would no longer be covered.
The Offshore Alliance disputed Shell’s characterisation of events, saying Shell had not spoken to the union regarding the lock-out nor what protections union workers would provide under a lock-out scenario, with regard to safety and emergency response.
"The union and our members will always do everything within our capacity to ensure workers are not exposed to serious and imminent OHS risks. It is highly offensive for Peter Norman to suggest otherwise," the Offshore Alliance wrote in a Facebook post.
"What [Shell Asset Manager for Prelude FLNG] Peter Norman should have said is that Shell had acted on incompetent advice about how to deal with this bargaining dispute and had once again over-reached. [Shell’s] doubling down of threats will simply strenghten our resolve to go one day longer and one day stronger than the likes of Peter Norman, to sort out the Prelude FLNG [bargaining agreement]."
The Offshore Alliance claimed Shell has "threatened" to cancel a scheduled maintenance and inspection turnaround at Prelude in September and October, with a large number of dedicated crew who had previously committed to work on the scheduled turnaround shutdown of Prelude advising the union they are actively sourcing other work.
The Offshore Alliance claimed Shell is "rapidly heading for US$1Bn of lost production" at Prelude due to strike action.
UK-headquartered Shell has subsequently announced another successive quarterly profit record of more than US$11Bn for Q2 2022, with the supermajor citing high oil prices, tripled refining profits and strong gas trading among factors in its outsized earnings.
Shell’s profits have more than doubled each quarter for the last three quarters, a period of turmoil for fossil fuel flows as Russia’s attack on Ukraine resulted in financial proxy wars targeting energy flows that have included international sanctions and import and supply cuts.
Shell has also faced protests from consumers angered by the company’s profits during a time when consumer finances are being hit by high prices attributed to geopolitical events.
- Shell’s Prelude FLNG cleared for restart
- Prelude FLNG to remain closed Q1 2022
- Maintenance and repairs shut-in LNG production in Norway and Australia
- Prelude will not restart until 2021
20 July
Joint workers union, Offshore Alliance announced the extension of strike action that has affected Prelude for 40 days, first slowing and then stopping production at the facility entirely.
"Shell have lost several hundred million dollars of profit since initially slowing production, and then stopping production alltogether on Prelude," the Offshore Alliance wrote in a Facebook post.
"Shell has refused to bargain with the Unions and Employee Bargaining Reps since it announced 9 days ago that 95% of the Prelude workforce had voted ’No’ to its sub-standard Enterprise Agreement. The Offshore Alliance has put Shell on notice that its refusal to get back to the bargaining table is in breach of the Fair Work Act and will inevitably result in legal proceedings in the Fair Work Commission. The Offshore Alliance and our Prelude FLNG members won’t be backing down or backing away from our bargaining claims," the group said.
Similar action by workers against Chevron could be set to take place after the Offshore Alliance filed an application for protected industrial action with Australia’s Fair Work Commission. The strike action would be taken by workers on Chevron’s Wheatstone Platform, the largest offshore gas-processing platform ever installed in Australia, according to Chevron.
According to the Offshore Alliance, Chevron had, until the application was submitted, refused to extend negotiations on an enterprise agreement for workers.
"Heading down the path of Protected Industrial Action achieved more in five days than the five weeks of watching Chevron going around in circles while we waited for a response to a very simple request to continue bargaining (despite the delays since our last bargaing meeting). With global energy prices in a bull market, there is no better time than now for the Offshore Alliance to negotiate good EBA’s for our members," the Offshore Alliance said.
12 July
Shell said work bans are prohibiting offtake and the facility will soon reach its maximum storage capacity for LNG, LPG and condensate.
The work bans are being enforced as part of strike action by members of the Australian Workers’ Union (AWU) and Electrical Trades Union. The bans initially prohibited union members from mooring vessels at the offshore production facility for two weeks, under which restrictions Shell managed to load a single cargo.
With reports that results from a three-day vote on a new enterprise agreement offer from Shell were due to be announced 11 July, no agreement has yet been reached and further work bans that apply to unmooring vessels have been imposed.
"Production on the Shell-operated Prelude FLNG facility has been temporarily suspended due to work bans currently in force," a Shell statement read.
"Until the bans on the offtake of cargoes are lifted and the plant can be safely restarted, staff required to perform safety-critical functions will remain on board while all other workers have been demobilised. Shell recognises the entitlement of all workers to exercise their rights, including the right to participate in industrial action.”
While the joint workers union, Offshore Alliance, involved in the dispute over pay has not yet replied to a request for comment, during the first phase of the strike the Australian Workers’ Union said the negotiations involved financial matters that added up to less than the value of a single LNG cargo loaded from Prelude.
"Shell is throwing tens of millions of dollars down the drain instead of negotiating with workers - and they are choosing to take this action during an international gas crisis," the AWU wrote.
Prelude discharged its first cargo in June 2019, but the unit has faced problems. In 2020, Shell was forced to close the unit for 11 months after an electrical trip led to a series of extensive investigations and repairs.
The operator restarted production in April at a time when buyers worldwide, and particularly in Europe, are looking at alternatives to replace Russian gas supplies as Russia threatens to retaliate against Western nations following its invasion of Ukraine by completely shutting off piped gas supplies to the EU.
Australia ended 2021 as the world’s top LNG producer and the leading exporter of LNG to China, delivering 32M tonnes in 2021. This represented a rise of 7.1% over 2020.
Located approximately 475 km northeast of Broome in Western Australia, Prelude FLNG is operated by Shell in a joint venture with Inpex (17.5%), Kogas (10%) and OPIC (5%).
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