Fifth LNG import terminal planned as South Korean developer inks deal with Port of Newcastle
A South Korean developer has inked a deal to develop an LNG terminal in Newcastle, taking planned import projects to five.
Australia’s fifth LNG import terminal has been proposed by a South Korean developer, striking a preliminary deal with the Port of Newcastle to boost gas supplies to the nation’s east coast as part of a $US430 million ($586m) facility.
EPIK, described as a Seoul-based LNG project development company, says the Newcastle LNG facility covers an option agreement to start initial works on a floating storage and regasification unit followed by other projects including a gas-fired power plant and an LNG bunkering facility.
“Based on our assessment of the NSW gas market, particularly along coastal demand regions such as Newcastle and Sydney, we are confident that by importing LNG via a new, low cost FSRU terminal, we will be able to provide an infrastructure solution that is capable of delivering a cost-efficient source of alternative gas supplies to the region on a long-term basis,” EPIK founder and managing director Jee Yoon said.
The capacity of Newcastle LNG is expected to be about 1.5m tonnes a year of LNG.
EPIK will be pitted against four other rival operators who claim LNG imports now make economic sense because east coast gas prices are exposed to international pricing after $70 billion of LNG export plants at Gladstone were built to export more gas than their proponents could develop themselves.
As a result of this and the decline of the east coast’s more cheaply produced gas, traditional prices of $3 to $4 per gigajoule have risen to between $9 to $11, with predictions of more price rises as international LNG markets tighten.
Newcastle LNG may struggle to gain momentum given it is the last developer in the queue, Credit Suisse says.
“The Newcastle LNG FSRU proposal appears late to the party, and if they are seeking term contracts with industrial buyers to proceed to a final investment decision, then we doubt it will make progress,” Credit Suisse analyst Saul Kavonic told The Australian. “We can’t see industrial buyers locking themselves into term deals at LNG import parity prices, given they are able to secure gas through the pipeline network below import party, and have hope for government intervention to lower prices further. Unless EPIK are willing to self fund the FSRU without locking in customers, it will be a struggle for the project to proceed.”
The Port of Newcastle said the project fits with its diversification plans and it supports EPIK on its preliminary investigation work.
The four other Australian projects include AGL Energy’s $250m LNG terminal in Victoria’s Crib Point, slated for the first half of 2020, with the Andrew Forrest-backed Australian Industrial Energy working to a similar timetable for its proposed Port Kembla facility in NSW.
Oil giant ExxonMobil is also considering a Victorian LNG import plant to replace rapidly declining Bass Strait gas fields with the facility expected to take advantage of existing infrastructure at the Longford gas plant.
While in South Australia, the Mitsubishi-based Venice Energy is also looking to lock in first gas supplies by mid-2020 for its Pelican Point storage proposal.
