Egyptian gas demand could delay Andrew Forrest’s Port Kembla LNG terminal launch, again: consultant

There’s arguably better money in Squadron parking its floating storage unit in Egypt longer than repatriating it to Australia, where gas supply is projected to tighten significantly later this decade.

Squadron Energy is building Australia’s first LNG import terminal and the only gas import terminal.

The launch of Andrew Forrest’s Port Kembla LNG import terminal could be delayed by another year if a key piece of floating infrastructure stays in Egyptian waters, potentially stoking fresh concerns about east coast energy security.

Squadron Energy, Dr Forrest’s investment vehicle and the owner of the Port Kembla project, has opted to extend the deployment of its floating storage and regasification unit, the Hoegh Galleon, to an Egyptian customer.

That’s because a gas crunch in Egypt, once a net exporter of gas, has rendered the market extremely tight and underpinned huge returns for operators who can get access to it.

New analysis finds that a provider like Squadron would do financially better in Egypt than returning the Hoegh Galleon to Australia in time for winter 2027.

Squadron’s vessel is earmarked to arrive in NSW at the end of 2026 under its revised timeline. It was originally touted for operation as early as next year.

Squadron Energy CEO Rob Wheals stuck by his 2027 target for “providing a critical insurance policy for Australian households and industry” that serves NSW and Victoria.

“We’re calling for a market mechanism that allows the market operator to procure LNG when needed, preventing price spikes and ensuring supply,” he said in a statement.

Port Kembla Energy Terminal, Squadron’s ‘virtual pipeline’.

“The Port Kembla Energy Terminal acts as a virtual pipeline, flexibly connecting the east coast to both domestic and international gas supplies at the lowest available prices.”

The Australian Energy Market Operator has forecast a structural gas deficit from 2029 as legacy fields in the Bass Strait decline, with intermittent shortfalls possible even in 2027 during peak demand periods.

Consultancy Energy Edge said newly struck supply agreements suggest the North African nation will require the Galleon for even longer.

“The current situation in Egypt is likely to put some doubt on the return of the FSRU until after winter 2027,” said Josh Stabler, Energy Edge managing director.

“Especially given Origin’s Eraring coal plant is expected to close following that winter, which will reduce the gas-fired generation required during that period.”

Port Kembla has long been viewed as the most viable import terminal to backstop falling domestic production, particularly given its advanced state of development and proximity to existing pipeline infrastructure.

But the Galleon is essential.

AEMO has previously warned that periods of extreme weather, such as the cold snap in winter 2023, can trigger rapid drawdowns on gas reserves. More severe was the crisis of winter 2022, when a combination of unplanned outages at coal-fired plants and surging demand led to gas generators operating almost continuously.

If a major coal outage were to coincide with cold weather and no access to imported LNG, wholesale electricity prices could soar.

Despite the risk, uncertainty about future gas demand and pricing has made large industrial customers hesitant to sign long-term contracts for buying imported LNG.

That in turn has undermined the commercial case for early deployment of the Galleon at Port Kembla.

“A government partnership would open the market to more gas and greater competition, in the interest of consumers,” Mr Wheals said.

The Victorian government is pushing federal and state energy ministers to give AEMO expanded powers to act as a foundational buyer of LNG, effectively underwriting imports to guarantee supply.

But the proposal has sparked tensions among the states, particularly Queensland and South Australia, which argue the move would inflate prices across the market and reward Victoria — the country’s most gas-dependent state — for blocking new onshore gas development.

Critics of LNG imports also warn the policy could increase Australia’s exposure to volatile global markets, despite being one of the world’s largest LNG exporters.

Import terminal proponents reject that view, insisting prices would remain in line with domestic supply benchmarks.

Originally published as Egyptian gas demand could delay Andrew Forrest’s Port Kembla LNG terminal launch, again: consultant