Origin deal raises stakes for Andrew Forrest’s LNG import plant

Andrew Forrest is bankrolling a plan to import LNG at NSW’s Port Kembla as it seeks to ease a forecast supply crunch in the next few years.

Origin Energy’s new east coast gas deal with APA may have set off alarm bells for billionaire Andrew ‘‘Twiggy’’ Forrest. The iron ore magnate is bankrolling a plan to import LNG at NSW’s Port Kembla as it seeks to ease a forecast supply crunch in the next few years.

While the project remains the frontrunner among the half-dozen developers racing to bring new volumes to market, Origin was widely regarded as an anchor customer for the facility.

The country’s leading electricity retailer, which part-owns one of Australia’s largest LNG export plants, has been in negotiations to tie up a deal that would see it become the biggest buyer of gas from the project.

So Origin’s decision on Wednesday to sign a four-year deal with Queensland’s Australia Pacific LNG for an additional 91 petajoules of gas from January 2022 would have been keenly felt at Forrest HQ.

Sources say the door is still open for Forrest’s plant to nut out a supply pact with Origin.

But the utility’s decision to opt for gas from the APLNG venture — where it owns a 37.5 per cent stake — along with APA’s transport costs down to users in southern states has sparked questions over the cost competitiveness of Twiggy’s proposed plant.

Imported gas will be relatively expensive at around $8 to $10 a gigajoule, but volumes will be available in the market in the next few years, compared with more uncertain timings for domestic gas production.

Supporters of Port Kembla maintain the project remains on track and point to both NSW and federal government support for the development and the ability of Forrest to fast-track the project after the billionaire acquired Marubeni and JERA’s stakes to assume full control of the facility.

Another twist — and potential fillip for Forrest — is the decision by Origin’s rival, AGL Energy, to abandon its own LNG import station at Victoria’s Crib Point. That means AGL will be scouring the market looking for extra volumes of gas it can lock in as many of its legacy contracts roll off. Origin’s move may open a door for AGL.

EnergyAustralia, one of Australia’s big three power retailers, reached a preliminary pact worth $500m with the Port Kembla plant to buy 15 petajoules of gas but remains the only confirmed buyer to date.

The NSW plant would supply 100 petajoules of gas annually.