Victorian government knocks back AGL Energy’s $250m gas import plant on the Mornington Peninsula
AGL may be forced to buy gas from rivals, after the Victorian government rejected its gas import plant amid community protest.
AGL Energy has suffered a major blow after its LNG import plant in Victoria was rejected by the state government over environmental concerns, potentially forcing the power giant to buy gas supplies from rival projects.
The power giant conceded last year that it underestimated the challenge of developing Australia’s first gas import plant, with opponents including Federal Health Minister Greg Hunt arguing it was the wrong location for a large industrial facility.
The Victorian government found marine discharges from the proposed project would have unacceptable effects on the Western Port environment in the Mornington Peninsula, following an assessment of the plant amid large community opposition from local groups.
“This has been an exhaustive, open and transparent process and this is the right outcome for the local community, the environment and Victoria as a whole,” Victorian Minister for Planning Richard Wynne said.
“It’s very clear to me that this project would cause unacceptable impacts on the Western Port environment and the Ramsar wetlands – it’s important that these areas are protected.”
The project was originally set to cost $250m, with investors surprised at AGL’s disclosure on Tuesday that it had already spent $130m on the proposed plant before it had reached a final investment decision.
AGL chief executive Brett Redman interrupted a presentation unveiling a split of its business into retail and generation arms once the Victorian government decision was made public on Tuesday.
He emphasised the utility would continue its role as a gas trader and was open to becoming a customer from rival LNG projects.
“We need to think about whether we continue to allocate time and resource to this project when we’ve got a lot of other projects underway,” Mr Redman told The Australian.
Still, AGL now faces pressure to ensure it has sufficient access to gas given a potential shortfall in its own portfolio in the coming years.
MST Marquee analyst Mark Samter said: “Fortunately there are other options for AGL to import product, both through AIE’s Port Kembla terminal and a bit later through Viva’s Geelong terminal, but it would be squeaky bum time if I was them on it to make sure I lock down some of that capacity and don’t get squeezed out by competitors.”
The rejection may add to a possible gas squeeze forecast for later this decade, according to AGL.
Mr Redman told The Australian that “Crib Point is a project I think the market needs. “Everything we see in forecasting suggests Victoria is going to need access to more gas in the years to come and it was on that basis that we pursued for a number of years on the Crib Point project.”
Australia’s southern states will only dodge a gas shortfall if billionaire Andrew Forrest proceeds with a project to import LNG at Port Kembla, as production slumps from nearly depleted fields in Victoria’s Bass Strait according to official forecasts released on Monday.
Six LNG projects are in the development phase on Australia’s east coast but the current frontrunners are Andrew Forrest’s Port Kembla facility and Viva Energy’s Geelong plant.
Mr Forrest, the founder and chairman of iron ore giant Fortescue Metals Group, is expected to sanction the Port Kembla terminal, with a target of first supplies in late 2022 making Australia an LNG importer for the first time despite also being the world’s biggest LNG exporter.
The Ai Group said the decision on Crib Point raises the stakes for the Victorian government.
“Government and stakeholders – especially the groups that fought so hard to stop the Crib Point development – also need to grapple with the scale of projects that will be needed for a successful transition to net zero emissions,” Ai Group chief executive Innes Willox said.
“We are going to need new transmission lines, new renewable energy zones, new port facilities for hydrogen or other energy intensive exports, new industrial sites for clean materials.”