Australian LNG imports closer to becoming reality

06 June 2018, Week 22, Issue 628

Exploding Asian demand for Australian natural gas exports has led to domestic shortages, creating a commercial case for the installation of multiple LNG import facilities. The backers of two proposed LNG import ventures announced plans this past week that will move each project closer to beginning gas deliveries.

Australian Industrial Energy (AIE), a consortium of locally owned Squadron Energy and Japan’s JERA and Marubeni, said on June 4 that it had opted to locate its import terminal at Port Kembla, which lies to the south of Sydney.

On June 1, leading Australian power producer AGL Energy said it anticipated making a final investment decision (FID) on the installation of a floating storage and regasification unit (FSRU) in fiscal 2018-19, which begins on July 1, at Crib Point south of Melbourne.

NSW supplies

AIE said this week that its project could supply local industries in New South Wales by 2020. If this timeline is met, the consortium could pip AGL to the title of Australia’s its first gas importer, with the power utility aiming to begin shipments in either 2020 or 2021.

AIE said its terminal would be able to supply more than 100 PJ per year of gas – equal to 2 million tpy of LNG – enough to meet more than 70% of NSW’s current gas requirements. The consortium estimated the terminal would likely require A$200-300 million (US$152.7-229 million) of investment.

JERA and Marubeni reportedly each own up to 25% of the consortium, with Squadron Energy being the project’s senior investor.

News of AIE’s plans broke back in February, with the consortium targeting East Coast industrial gas consumers and even a new thermal power plant (TPP). AIE’s CEO, James Baulderstone, said at the time that an FID on the project was expected this year. He added: “This market is desperate for new gas.”

Australia has two proposed import terminals on the board, despite its own gas production and exports having risen rapidly in recent years. The country is anticipated to eclipse Qatar as the world’s largest exporter before 2020, with the government forecasting that shipments will rise from 52 million tonnes in 2016-17 to 77 million tonnes in 2018-19. In contrast, the Middle Eastern gas producer shipped 74 million tonnes in 2016, with volumes anticipated to remain roughly level in the run-up to 2020.

Victoria project

AGL’s A$250 million (US$190.9 million) project aims to deliver 130-140 PJ per year of gas – equal to 2.6-2.8 million tpy of LNG – via a terminal located at Crib Point south of Melbourne. The installation of the FSRU in Victoria would also require the construction of a jetty and related infrastructure.

“We are in discussion with short-lived LNG suppliers and FSRU providers on the other components of the project,” Reuters quoted AGL’s general manager of energy supply, Phaedra Deckart, as saying at a Singapore conference last week.

The company currently relies on supplies from ExxonMobil, BHP Billiton and Royal Dutch Shell. ExxonMobil and BHP supply gas from the Gippsland Basin and Shell supplies gas from Queensland, but AGL Energy is seeing rising demand from retail customers and for power generation for its own facilities.

“Australian consumers are paying at times more and higher prices than the LNG netback prices, so we see the LNG imports effectively putting a cap,” Deckart said. “It doesn’t mean that other Australian supply won’t be coming to the market in Australia, but it will mean it can’t come to the market at a price higher than LNG import pricing.”

She added that with the FSRU, unplanned outages, capacity constraints or security of supply issues could prompt AGL to import additional cargoes of LNG.

According to industry body the Australian Petroleum Production & Exploration Association (APPEA), the country has seven operating LNG developments and three more under construction. Other projects are being considered. Most of Australia’s LNG is under long-term contract to Japan, South Korea and China.

Edited by

Andrew Kemp


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