Shell has suspended production and is moving most of its workforce off its floating gas platform, Prelude, amid ongoing industrial action.
It is the latest chapter in negotiations between Shell and Offshore Alliance, the union representing members on board the gas facility.
Tensions flared last month when contractors set to fly out to the rig were told to stand down and shipments from the facility slowed.
The dispute flared up again after a new enterprise bargaining agreement proposed by Shell in a bid to break the deadlock was voted down by 95 per cent of union members last week.
The LNG facility, 470 kilometres off Western Australia's Kimberley coast, was brought online in 2019 but has been plagued by technical problems.
It was shut down temporarily after a fire last year.
Agreement 'substandard', union says
The disagreement over wages has seen union members ban the performance of certain tasks onboard, including a stoppage on unloading cargo onto ships for delivery at certain times.
A Shell spokesperson said production at the facility had been suspended due to the "work bans currently in force under Protected Industrial Action … that prohibit offtake activities".
"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 will be demobilised," the spokesperson said.
According to publicly available documents, about 250 people typically working aboard the facility.
That number swells to 300 when heavy maintenance is required.
"Shell recognises the entitlement of all workers to exercise their rights, including the right to participate in industrial action," the Shell spokesperson said.
But the company's claims about the shutdown were rejected by Offshore Alliance spokesperson Zach Duncalfe, who blamed the stoppage on Shell's negotiating tactics.
"Shell has decided to adopt a very hostile, intransigent method of bargaining and it's their way or the highway," he said.
"They're putting themselves in this position by a not talking to us and putting out a substandard enterprise agreement that they knew – or should have known – that no-one would vote for."
The union has previously said Shell proposed that 25 per cent of workers' pay be "discretionary".
It hopes to continue negotiating until a new agreement is reached.
Dispute comes amid energy crisis
The developments come as gas prices rise due to supply shortages and the war in Ukraine, which has wreaked havoc on the energy market in the eastern states.
The move could push gas prices higher even though Shell only provides exports from Prelude to customers overseas, Monash University Energy Institute director Ariel Liebman said.
"The problems we have domestically on the east coast are because we are coupled to the same global market and the same supply/demand balance that the Prelude exports play into," he said.
"On the east coast, spot prices for domestic gas can't go much higher — they sort of tend to be capped by the domestic gas market rules."
Shell will be losing revenue generated by the shutdown, but it might not affect the balance sheets too profoundly because of the sky-high gas price, according to Dr Liebman.
"I guess they'll pick up some of that lost revenue through further increases in spot prices around the world that the other [Shell] facilities might benefit from," he said.
"So maybe, on the balance, it's not totally terrible for them as a global portfolio, but it is very strange to be doing it at this time."
High prices were affecting everyday consumers, Dr Liebman said.
"Any increase in the reduction in supply leads on to difficulties, even if it's only through impacts on price," he said.
"So if the prices go up even further, some people can't afford to use it and they will not heat their houses or businesses or produce energy, electricity or run their factories."
