Forrest to build NSW's first LNG import terminal at Port Kembla
Fortescue Metals chairman Andrew "Twiggy" Forrest’s Australian Industrial Energy will build a floating LNG import terminal in Port Kembla to bring more gas to NSW and Victoria as soon as 2020.
The regasification facility, which will cost between $200 million and $300 million to construct, will also be NSW’s first LNG import terminal.
The terminal will import up to about 100 petajoules of LNG, which could meet around 70 per cent of NSW’s total gas demand.
It comes after the Australian Competition and Consumer Commission forecast a looming gas shortage on the east coast of up to 150 petajoules, triggering the government last year to threaten gas companies with a mechanism that would slash exports unless they secured more domestic gas supply.
The new gas terminal is a lower-cost alternative to proposed interstate pipelines and a cross-country, $5 billion West to East gas pipeline, which could also alleviate a gas shortage.
The location of the new east coast gas terminal came down to a decision between two sites - Port Kembla or the Port of Newcastle. AIE chose Port Kembla as it is closer to large consumers of industrial gas as well as existing pipeline infrastructure.
The terminal will have storage tanks capable of holding around four petajoules of gas, equivalent to between 10 and 12 days of NSW’s total demand.
For the second stage of the development, AIE is investigating the construction of a new gas-fired power plant. It is understood this could include either expanding on existing small-scale power plants nearby to provide more energy to industrial users, or building a new 750-megawatt power plant.
The facility will see LNG carriers visiting Port Kembla around every two to three weeks.
Who is AIE?
Australian Industrial Energy is led by the former Santos and Duet Group executive James Baulderstone, and Stuart Johnson, the head of Mr Forrest’s gas business, Squadron Energy. The consortium has the backing of Japanese firms Marubeni Corp and JERA, which is the world’s largest buyer of LNG.
JERA will supply the gas while trading house Marubeni provides infrastructure financing.
AIE has already signed 12 memorandums of understanding with industrial users for the supply of gas but declined to name these groups.
JERA’s fuel business development and gas and power development senior vice president, Gaku Takagi, said the facility would be able to bring cheaper LNG to NSW.
“We believe we can make a major contribution to NSW and east coast energy supply competition and security,” Mr Takagi said.
Mr Baulderstone said AIE would work as quickly as possible to get the facility off the ground as the rising price of gas stretches Australian businesses' operating costs as they seek new sources of gas supply.
“In recent times, wholesale gas prices have doubled, and in many cases tripled, in NSW. In addition, many industrial companies are now unable to secure gas for any period longer than 12 months,” Mr Baulderstone said.
“AIE is well placed to deliver firm, long-term gas on highly competitive pricing and terms as a soon as 2020.”
The development is a boon for NSW, which has traditionally imported gas for industry and power generation from Queensland.
AIE is planning to lodge its development applications within the next few months.