Andrew ‘Twiggy’ Forrest puts his foot on the gas

Mining billionaire Andrew Forrest plans to accelerate the Port Kembla LNG import terminal in NSW.

Mining billionaire Andrew Forrest plans to accelerate the Port Kembla LNG import terminal in NSW. Pictures supplied by Andrew Forrest

Mining billionaire Andrew Forrest plans to accelerate the Port Kembla LNG import terminal in NSW, putting it on track to become Australia’s first import facility, after his decision to buy out two Japanese owners and develop the plant alone.

The Australian Industrial Energy consortium was originally split between Mr Forrest‘s privately owned Squadron Energy, Japanese trader Marubeni and JERA, an LNG-buying joint venture between Tokyo Electric Power Co and Chubu Electric.

Squadron, owned by Mr Forrest’s Tattarang, will acquire Maurbeni’s 30.1 per cent stake and JERA’s 19.9 per cent share to assume full control of the facility.

AIE said it was now focused on accelerating the project under its Squadron arm. A final investment decision is due in the next two months with construction potentially starting before the end of 2020 and first supplies to be delivered by late 2022.

That would likely see Mr Forrest emerge as the first LNG importer in Australia only a few years after the nation toppled Qatar to become the world’s biggest LNG exporter. Australia’s east coast gas market has been crimped in the past few years due to Queensland LNG exports, onshore development restrictions, falling Bass Strait production and the increasing cost of bringing new domestic supplies to market.

“Squadron Energy is committed to the expedited development of the gas import terminal with the objective of having the capacity to supply 70 per cent of NSW’s gas needs by late 2022,” AIE said in a statement.

The project has been hamstrung by delays in signing up customers after targeting binding five-year deals with prospective east coast customers. Utility EnergyAustralia has been the only named buyer so far despite a vocal campaign by big industrial users over difficulties securing long-term gas supplies.

Mr Forrest now faces a decision over whether to green-light the project potentially without contracts in place to cover all of the supply and underpin the investment.

“After being unable to secure sufficient contracts to underpin a project sanction to satisfaction of its more conservative joint venture partners, the question now is will Andrew Forrest be willing to put his money at risk and build the project on spec, before a proposed terminal in Victoria overtakes AIE’s lead,” Credit Suisse analyst Saul Kavonic said.

AIE in June complained that the gas industry needed clearer signals to bring new supplies to market before it could take a final investment decision originally planned for the September quarter.

Five import plants have been proposed in Australia with two in NSW — the Port Kembla facility and a South Korean-sponsored development in Newcastle — while in Victoria AGL Energy is battling planning delays for its Crib Point scheme in the Mornington Peninsula, with Viva Energy’s Geelong hub also in the race to be sanctioned. Venice Energy has plans for a South Australian project.

LNG import projects “are the only means of securing supply sooner rather than later and at the necessary volume” according to EnergyQuest.