Port Kembla LNG terminal strikes $500m deal with EnergyAustralia
Andrew Forrest’s planned LNG terminal has struck a $500m supply deal with EnergyAustralia.
Andrew Forrest’s planned LNG terminal in NSW has struck a five-year, $500 million-plus supply deal with EnergyAustralia as it works to lock in customers for the nation’s first gas import plant.
EnergyAustralia, one of Australia’s big three power retailers, reached a preliminary agreement to buy 15 petajoules of gas from January 1, 2021.
Gas from the Port Kembla terminal will be supplied to EnergyAustralia’s residential and industrial customers on the east coast.
“New supplies are desperately needed,” EnergyAustralia executive for markets Ross Edwards said. “We think commercial, market-based solutions are the best, most efficient way to fill the supply gap and ease pressure not just on gas prices but power prices, too.”
After winning NSW government approvals last month, project developer Australian Industrial Energy has worked to finalise supply contracts with buyers by June, ahead of a mid-2019 final investment decision.
AIE is a consortium made up of Mr Forrest’s privately owned Squadron Energy, Japanese trader Marubeni and JERA, an LNG-buying joint venture made up of Tokyo Electric Power and Chubu Electric.
“Our agreement with EnergyAustralia shows that the Port Kembla gas terminal is a real solution for Australian energy retailers and manufacturers looking to avert the looming gas supply crisis,” Squadron Energy chief executive Stuart Johnston said in a statement.
“We have negotiated a market competitive, oil-linked price with EnergyAustralia. It’s an agreement that provides their business with certainty in the face of increasingly challenging domestic gas market supply.”
Mr Forrest is a high-profile backer of the $250m LNG terminal that could supply up to 70 per cent of NSW’s gas needs. LNG may be supplied from West Australian producer Woodside Petroleum and even the US to help arrest falling domestic production from Australia’s southern states, including the Bass Strait.
Fifteen industrial users signed an initial memorandum of understanding to buy gas from the LNG plant, which then moved to a similar number of gas supply agreements. AIE’s next challenge is to strike binding five-year deals with prospective east coast customers.
The customers lined up include industrial players in NSW and Victoria, corporates and customers with retail positions. However, one sticking point may be price, with AIE offering deals in the $10-$12 a gigajoule range, three to four times historic rates. and potentially bettered by domestic offers according to Credit Suisse.
Mr Forrest aims to be Australia’s LNG importer, but faces competition from developers in other states. Utility AGL Energy and big gas producer ExxonMobil have flagged potential import terminals in Victoria while Japanese conglomerate Mitsubishi is backing a plan to import LNG at Pelican Point in South Australia.
Domestic gas prices have surged on a wide range of factors, including Queensland’s LNG export plants, the growing cost of developing new gas fields and onshore production restrictions in NSW, Victoria, South Australia and the Northern Territory.