Venice Energy accelerates east coast gas import plan

Mitsubishi-backed Venice Energy may start importing LNG into Australia’s eastern states at the same time as two rivals.

Mitsubishi-backed Venice Energy may start importing LNG into Australia’s eastern states at the same time as two competing projects as the venture prepares to apply for approvals from the South Australian government ahead of an expected domestic gas squeeze.

The private firm, headed by former BHP executives, had initially been considered the laggard among a string of rival projects looking to bring new sources of the fuel into the market to help head off an imminent supply crunch.

Venice now plans to submit a development application for its floating storage and regasification unit to the state government in the next two months, allowing it to target first gas supplies by mid-2020.

That timeline could see gas begin flowing from the Venice project on a similar schedule to AGL Energy’s import plant in Victoria, which fast-tracked its own deadline to the first half of 2020. It would also be in line with the early 2020 timetable of the Andrew Forrest-backed Australian Industrial Energy import terminal slated for Port Kembla in NSW.

A fourth scheme is being considered by energy giant ExxonMobil in Victoria, with imports slated for 2022 to replace the state’s rapidly declining Bass Strait gas fields.

Venice said its plan to focus on the gas import plant as a separate process from its linked gas-fired power station would allow it to capitalise on east coast markets that had been hit by state exploration restrictions, Queensland LNG exports and the cost of finding new supplies.

The Venice group expects an eight-month turnaround for a government decision on its Pelican Point storage proposal ­compared with up to 14 months for the 500 megawatt power station.

“The realisation is that we can get through the approval process quicker as it’s a simpler design — you can bring it to the market sooner and you can reach revenue sooner,” Venice managing director Kym Winter-Dewhirst told The Australian. “We don’t want the delivery of gas held up because of a longer process for the power side.”

With Venice predicting gas shortages on Australia’s east coast by mid-2019, the group remains confident buyers will support the differing strategies of the multiple LNG import developments given the tight market forecasts.

“I don’t think one necessarily cancels the other one out,” Mr Winter-Dewhirst said. “The AIE proposal in Port Kembla is a very different marketplace from the one we would aim to play in South Australia. The cost of getting gas from NSW to South Australia with pipeline charges would be significantly higher than we are likely to land the LNG in Adelaide. So we don’t see those two as competing against one and other.”

AGL’s proposed Crib Point import plant was also focused on a different strategy, he added.

“It would seem they are looking to bring gas in to cover a shortfall out of the Otway Basin and to supply an existing network in Victoria. Again, we think we remain highly competitive in that environment.”

Australia’s southern states may have to rely on LNG imports to get through peak demand in winter, with gas prices on Australia’s east coast set to surge by up to 70 per cent over the next decade, consultancy Wood Mackenzie warned last week.

It predicted that in the next decade LNG imports will be the only physical and commercial alternative to ensure security of supply in winter unless additional pipeline capacity becomes available. “These squeezes don’t just happen on any given day. It builds and you can see it already,” said Mr Winter-Dewhirst. “We believe that from the middle of 2019 you’ll start to see more evidence of a tightening of the market in terms of suppliers on the east coast and that’s how it will run through to 2021 and beyond.”

Prices for gas could surge to $14.30-$15.90 a gigajoule by 2030 for Australian users from a forecast $8.50-$11 next year without further exploration and lower costs of developing new supply sources, according to Wood Mackenzie. Prices will rise to $10.70-$12.70 a gigajoule by 2025.