LNG import costs will be comparable with domestic gas, says Squadron Energy boss

Squadron Energy boss Rob Wheals says imported gas will be comparable to domestic supplies, which will allow Australia to import an eventual glut of global supplies.

The cost of imported LNG will be comparable with domestic gas as local stockpiles tighten, and in the long term Australia will have access to cheap, abundant global supplies, according to the chief executive of Squadron Energy – the developer of the country’s only import terminal.

Australia’s east coast faces a gas shortfall as soon as next year in unfavourable weather conditions, which would lift prices.

Australia’s energy market operator has warned that urgent action is needed to bolster supplies, but developments have been delayed continues to be held up, stoking alarm in the country’s manufacturing sector, which has warned its viability is at stake.

Rob Wheals – chief executive of Squadron Energy, which is close to finalising construction of the LNG import terminal at Port Kembla – said bolstering supplies would be difficult as new projects struggled to secure public support.

Mr Wheals said LNG imports would be comparable in price, and provide supply certainty.

“When we are at our most critical shortfalls is in our winter periods, which we know is countercyclical with the northern hemisphere,” Mr Wheals said.

“I just went and had a look at the Henry Hub price today, and it’s about $US2.18.

“By the time you convert that to Aussie dollars and transport it to Australia, you can absolutely compete with domestic prices.”

Gas is a vital fuel source for heavy manufacturing, and it plays a vital role in supporting Australia’s electricity grid during periods of high demand or unexpected slumps in supply, such as when a coal power station suffers an outage or renewable energy output falls due to unsuitable weather, so assurance of supply will be paramount.

But Australian officials are concerned about the prospect of higher than normal domestic ­prices.

Australia has some of the world’s largest sources of gas and is one of the largest liquefied natural gas exporters, so domestic ­prices have traditionally been lower than global benchmarks. Higher gas prices would reduce the competitiveness of manufacturers and could lift electricity prices should there be sustained periods of depressed renewable energy generation.

But Mr Wheals said several of the world’s largest LNG exporters were moving quickly to expand production, and those aspirations had prompted some analysts to forecast a glut, which would be beneficial to Australia.

“If you can access supplies from multiple sources, be it gas from Canada, the US, Nigeria, Mozambique, Qatar, then you’ve got multiple sources of competitively priced gas.

“Surely that’s going to be a better outcome than being beholden to a very constrained, small domestic market,” said Mr Wheals.

Several of the world’s largest exporters, most notably Qatar, have pledged a major expansion of LNG production.

Qatar officials have said this will help countries that do not have the renewable energy resources to meet net zero emissions by 2050 commitments.

Gas produces lower emissions than coal, which many countries continue to rely on, but critics say it could delay the switch to ­renewables.

Even in countries like Australia, which has abundant renewable energy prospects, the role of gas remains contentious – though nearly all players in the country’s energy market admit there is no alternative.

The Albanese government has pledged to rapidly wean the nation from its coal dependency and have renewables generate 82 per cent of the country’s electricity by 2030. While it is edging forward in the target, it does not have adequate long-duration options when unsuitable weather reduces solar and wind power output.

Gas-fired power stations can run for days and can be switched off when conditions have ­improved.

Originally published as LNG import costs will be comparable with domestic gas, says Squadron Energy boss