Mining magnate Andrew “Twiggy” Forrest’s Squadron Energy is in talks with potential gas customers, as it aims to beat AGL and other energy giants to become the nation’s first importer of natural gas.
Since buying out its two Japanese joint-venture partners and taking full ownership of the project last year, Squadron Energy has been accelerating works to develop a liquefied natural gas (LNG) import terminal at Port Kembla, including signing a long-term lease at the site and finalising an agreement to connect it to pipelines.
Analysts expect the project to reach a final investment decision as early as the first quarter of the year and Squadron is aiming for gas imports to start flowing by 2022, ahead of potential winter supply shortfalls from as early as 2023. The energy market operator, AEMO, is predicting a supply squeeze in Victoria and NSW by 2023 due to declining output from gas fields in Bass Strait, which once supplied 40 per cent of the east coast’s needs.
Squadron’s projected timeline also puts it ahead of other new gas supply projects across the east coast, including power giant AGL’s controversial plan for an LNG import terminal in Victoria’s Western Port and Santos’ recently approved coal-seam gas development at Narrabri in northern NSW.
Company chief executive Stuart Johnston said interest from prospective buyers was strong and long-term gas purchase contracts to underpin the project were expected to be finalised shortly.
“Where we are at the moment is we are really working to finalise those customer agreements,” Mr Johnston said.
“We are in advanced stages of discussions with several customers, and that’s the next piece to fall.”
Electricity and gas retailer EnergyAustralia has already signed on to buy LNG from Squadron’s proposed Port Kembla project.
Australia is the world’s biggest exporter of natural gas – a fuel widely used in power generation, heating and manufacturing – but most is produced in the nation’s north, far away from demand centres in the south-eastern states, and is sold on long-term contracts to overseas buyers.
The Port Kembla project is one of several proposed LNG import terminals across the south-eastern seaboard. Suppliers and manufacturing businesses that rely on gas for energy or as a feedstock are turning to imported LNG as a way to increase competition, place downward pressure on prices and secure long-term supply.
“In the absence of someone going and finding a massive gas field that we’ve missed for the past 60 years down in Victoria, all the other sources are either a long way away, expensive, a combination of both … or they will take a long time to develop,” Mr Johnston said.
“When you’re looking for security of supply, it will be a very good insurance policy for Australia to have one of these terminals built.”
Spot prices for LNG in Asia, however, have been volatile in recent months, adding to uncertainty about how much imported gas could cost. After collapsing to multi-year lows of less than $US4 per million British thermal units during COVID-19 disruptions last year, a freezing cold winter in the Northern Hemisphere and a shortage of the fuel has sent the benchmark price for Asian LNG cargoes soaring sky-high to more than $US20.
Wood Mackenzie analyst Daniel Toleman said the global consultancy expected the Squadron-owned Australian Industrial Energy to sanction the Port Kembla terminal this year, with “formal FID [final investment decision] … in the first quarter of 2021”.
UBS analyst Tom Allen said the expected 2021 investment decision would allow first gas flows by the winter of 2023.
Source: Thanks smh.com