Government should underwrite gas import terminals, EnergyQuest boss Graeme Bethune says

Gas import terminals should be considered critical infrastructure and underwritten by the federal government, EnergyQuest’s Graeme Bethune says.

The Asia Vision LNG carrier docked at the Cheniere Energy terminal in Sabine Pass, Texas. Graeme Bethune says Australia probably needs two gas import terminals – one in Victoria and one in NSW.

The federal government should consider underwriting gas import terminals on the east coast as they do with other critical infrastructure, EnergyQuest chief executive Graeme Bethune says.

While Dr Bethune says the current east coast energy crisis is really an electricity crisis rather than a gas crisis, he says the nation probably needs two gas import terminals – one in Victoria and one in NSW.

This lines up with plans from Andrew Forrest’s Squadron Energy for a terminal at Port Kembla and Viva Energy’s Geelong project, which the company hopes to make a final investment decision on this year.

Venice Energy, led by former BHP executive Kym Winter-Dewhirst, is also planning a terminal at Port Adelaide.

But with extreme volatility in gas pricing and terminal customers dragging their heels on committing to contracts, Dr Bethune said another mechanism might be necessary as part of current crisis planning at the federal level. “Our view is you need two terminals: one in Sydney, one in Victoria,’’ he said.

“What tends to happen in other countries is that these things get underwritten as part of a kind of capacity mechanism, as an insurance policy, which seems a reasonable idea.’’

Dr Bethune said Australian governments had been happy to underwrite infrastructure such as a $1.83bn desalination plant in SA that was built about a decade ago with the help of $328m in federal grants.

A similar approach to gas supply would make sense, he said.

“You never know when you’ll need them. It’s always possible that you will build it and it will turn out not to be needed. On the other hand, given the whole system is much less resilient than it was, because of coal outages and all the rest, you would have thought having some kind of insurance policy was a decent idea.’’

Dr Bethune said import terminals, at about $500m, were “not that expensive’’ in the context of the costs for energy infrastructure broadly.

Higher global gas prices complicated matters, but Dr Bethune said LNG import terminals could still be competitive at long term contract prices.

Mr Winter-Dewhirst said government underwriting of terminals was common across Europe.

“As we’ve spoken with potential partners or key suppliers out of the EU, they all start with the position ‘why isn’t the government underwriting this?’,’’ he said. “I’m not an apologist for the government, but you have to explain that it’s new here, and they haven’t ­really come to terms with it fully.

“Governments underwrite plenty of other things in Australia … and perhaps feel it’s not as necessary or as vital to the economy as some of us might believe, and maybe as a consequence of this current so-called gas crisis or energy crisis, it’s brought that into sharper focus for them.’’

Mr Winter-Dewhirst said Venice had been progressing through necessary milestones towards a final investment decision for its project, and was hoping to be in a position in the next couple of months to progress to FID and financial close.

EnergyQuest chief executive Graeme Bethune.

Further complicating matters around building gas import terminals in Australia was that Germany had now committed to building four LNG import terminals in a bid to reduce dependence on Russian gas, “which they’ll probably get built in the time it takes to prepare an environmental-impact statement in Australia’’, according to Dr Bethune.

“And so there’s a lot of demand on the market for floating storage and regasification units,’’ he said.

Squadron Energy’s interim chief executive Michael Shaw flagged this issue recently, confirming to The Australian that the Hoegh Galleon Floating Storage Regasification Unit, which had been contracted for the Port Kembla Energy Terminal, could be poached unless customers came forward to fill the capacity.

“The Port Kembla Energy Terminal is a critical piece of energy infrastructure which can provide gas into both NSW and Victoria and avoid the types of energy crisis we are seeing at the moment,’’ Dr Shaw said. “PKET is the only fully Australian-owned facility to have all approvals, is well into construction, secured an FSRU and is committed to transition to green hydrogen as soon as the market requires it.

“Critical to our facility is the FSRU which we have contracted. Our large retail customers are telling us they don’t need gas until 2026 and beyond and so we are faced with the FSRU going to Europe to help plug the gap left by the retreat of European countries from Russian gas. This means the Australian gas market will be short until at least 2026 and the crisis we are seeing today will become the new normal.’’

Dr Shaw said the German government had committed €2.5bn ($3.7bn) to secure four FSRUs and related infrastructure and an Italian utility had just paid $350m to secure its own FSRU.

So far only EnergyAustralia has tentatively agreed to use the PKET, which could supply three-quarters of NSW’s gas needs at full capacity. Dr Bethune said the volatility in the gas market was a huge issue, with Santos’s Narrabri project to come into the system, albeit not in the short-term.