LNG terminal ‘can double capacity’
Australia’s first LNG import terminal could double its planned capacity to plug an expected shortfall.
Australia’s first LNG import terminal, financed by iron ore billionaire Andrew Forrest, could double its planned capacity to plug an expected shortfall of gas on the nation’s east coast.
Amid high tension between manufacturers and energy producers about the ongoing energy squeeze on the eastern seaboard, the developers of the planned Port Kembla facility in NSW say volumes of imported gas could be expanded if warranted by customer demand.
Project developers Australian Industrial Energy plan to supply 100 petajoules of gas annually — equivalent to 70 per cent of the state’s demand — which could eventually be doubled, given the tight dynamics of the market.
“The 100 petajoules is a good number but if the market grows for power generation — for industrial users either in NSW or Victoria — by increasing the frequency of deliveries of LNG into the vessel, you can see supplies growing,” Stuart Johnston, chief executive of Mr Forrest’s Squadron Energy unit, told The Australian.
“Capacity limitations are not our issue. But our initial supplies are at a fixed price, whereas later capacity may require additional capital expenditure.”
AIE is a consortium of 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.
After sealing NSW government approvals in late April, the gas venture struck a five-year $500 million-plus supply deal with utility EnergyAustralia, underlining its credentials as a credible supplier to the tight domestic market.
The AIE joint venture will today award pipeline construction contract and wharf facility deals worth $250m as it edges closer to a mid-year investment decision on sanctioning the project ahead of first gas deliveries in late 2020.
The Spiecapag and Soletanche Bachy joint venture will build the wharf facility and pipeline connection to the Cringila Eastern gas pipeline, 6km from the wharf.
Critics of the LNG import terminal question the high price of gas delivered into Australia’s southern states compared with historic tariffs. AIE concedes prices will be between $10 and $11 a gigajoule but says the volumes will be available next year, compared with more uncertain timing for domestic gas production.
“It may not be the cheapest gas in the market and I admit it is probably above historic prices but what a few people are missing is its price certainty and transparency and it is tapping into a global supply,” Mr Johnston said.
Mr Forrest is a high-profile backer of the $250m terminal which could supply up to 70 per cent of the state’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 Bass Strait.
Fifteen industrial users signed an initial memorandum of understanding to buy gas from the LNG plant, which then moved into a similar number of gas supply agreements. AIE’s next challenge is to strike binding five-year deals with prospective east coast customers. Customers lined up include industrial players in NSW and Victoria, corporates and also customers with retail positions with some buyers already stating a preference for greater supplies during the winter months, which AIE expects to accommodate.
Mr Forrest is aiming to be Australia’s LNG importer, but faces competition from developers in other states.