Via the ABC:
Plans for the first liquified natural gas (LNG) terminal in New South Wales are being hailed as a “game changer” that will address the state’s energy supply issues.
A consortium backed by billionaire Andrew Forrest and Japanese energy giants has announced Port Kembla, near Wollongong, as the preferred site for the LNG terminal.
It would cost up to $300 million and source gas for the east coast market from South-East Asia, the United States and other parts of Australia.
The terminal would have the ability to supply more than 100 petajoules per year, enough to supply Greater Sydney’s needs, on a similar scale to AGL’s planned Crib Point facility in Victoria.
Port Botany and the Port of Newcastle were also contenders for the project.
Australian Industrial Energy chief executive officer James Baulderstone said Port Kembla was an ideal location with the nearby steelworks and other major industries.
“This is the heartland of manufacturing. We’ve had fantastic support from the community and the industry, it’s the best place in Australia,” Mr Baulderstone said.
The NSW Government has thrown its support behind the LNG terminal, saying it will lead to lower power prices for households and businesses across the state.
Trade and Industry Minister Niall Blair said gas was expensive because NSW relied on interstate sources for 95 per cent of its supply.
“They are going to bring gas in to this terminal here in Port Kembla at a price that is going to disrupt the market and drive down gas prices in New South Wales.
“This sends a clear message to the broader industry in New South Wales that there is a new player coming into the market that is going to drive competition and underpin supply.”
Ken Ohyama from the world’s largest LNG buyer, JERA, said the consortium was negotiating with sellers from across the globe to ensure the cheapest gas was made available in NSW.
“We’re looking to diversify our LNG portfolio and this is key to our plan. We have four LNG projects invested in Australia but we are keen to expand,” Mr Ohyama said.
Port Kembla is Australia’s largest motor vehicle import facility and one of the biggest export hubs for grain and coal.
The LNG terminal is expected to create 150 construction and 50 ongoing jobs and NSW Ports chief executive officer Marika Calfas said it would bolster the port’s ability to serve the growing Sydney area.
“It’s an opportunity for diversification and growth in our port activities and has potential for new value-added services,” Ms Calfas said.
“Located here in Port Kembla, it is extraordinarily well-connected to not only the Illawarra region, but to the Sydney metropolitan region and New South Wales.”
The consortium is also investigating whether to build a gas-fired power station, just over a month after AGL announced plans for a similar facility at the site of its coal-fired Liddell power station.
The project will now proceed to the detailed engineering phase, and will require planning approval from the NSW Government.
Mr Blair said the government would work with the proponent to make it a reality.
“We would welcome the continued investment, not just off the back of this import terminal but the other opportunities like a power generation asset here in the Illawarra that will make a big difference for industry in New South Wales,” he said.
The consortium plans to lodge its planning applications within the next few months and hopes to have the LNG terminal operating from 2020.
More via the AFR:
Mr Baulderstone has flagged likely gas prices from the terminal gate of $8-$12 a gigajoule. Though well above historical wholesale domestic prices of about $4, the range is lower than many new contract prices.
The body representing heavy energy users said the progress on the project was an important step towards a more competitive gas market.
“Establishing new avenues for gas supply must be part of the solution if we are to resolve the many challenges being faced,” said Andrew Richards, head of the Energy Users’ Association of Australia.
I don’t know what to tell you. This project will permanently raise NSW gas prices by a good 20-30%. Why? The following:
- imported LNG will become the marginal price setter of gas on the east coast given it will be much more expensive that the locally produced stuff;
- thus Asian seaborne market will be the marginal price setter of east coast gas which includes the cost of liquifaction, shipping and regasification;
- in effect, this will embed the Japanese price for gas in Australia. This is far worse even than the current target price of the government’s under-used domestic reservation mechanism which aims for the export net-back price (that excludes the cost of liquifaction, shipping and regasification, roughly $2-4Gj);
- today Twiggy would deliver gas at $13Gj plus whatever he charges for the privilege versus a local spot prices at roughly $8.50Gj or $8-10GJ on contract.
Note that JERA is the largest single buyer of Australian export gas. How nice of it to sell “the cheapest [Australian] gas” back to us with a giant mark-up. Honestly, JERA’s Japanese and Korean executives must laugh their heads off at Australia’s suicidal gas mismanagement. It may even be able buy the gas off Curtis Island then ship it south to Port Kembla while charging Asian prices for it.
Forrest will also dedicate every resource at his disposal to destroying the putative domestic reservation mechanism because if it stays in place then he can’t make any money, something the manufacturers signing up appear to have overlooked.
By endorsing this project, the NSW Government is choosing to hike gas prices to the Japanese JKM benchmark permanently. It will get a security of supply trade-off in return.
That doesn’t make it any less suicidal.
(P.S. Why didn’t the ABC interview me for the piece?)
