Japanese-backed Australian LNG import project wins fresh state approval

4/20/2020

A Japanese-backed consortium has won state approval for changes in its plan to import liquefied natural gas (LNG) to Port Kembla on Australia’s east coast, allowing the terminal to bring in more gas during the southern hemisphere winter months.

Australian Industrial Energy (AIE) said on Monday that with the planning approval from the state of New South Wales (NSW) in hand, it would now focus on securing customers for the A$250 million ($159 million) terminal.

The project is backed by the world’s biggest LNG buyer, Japan’s JERA, as well as Japanese trading house Marubeni Corp and Australian mining billionaire Andrew Forrest’s Squadron Energy.

Though vast resources elsewhere in the country make Australia the world’s second-largest LNG exporter, dwindling sources in its southern, most populous states mean imports will be required.

If AIE reaches a final investment decision this year, it could start importing LNG by 2022, with construction expected to take 14 to 16 months.

“This terminal will make the state of NSW more self-sufficient when it comes to energy and will create greater access to the global gas market,” said Mike Young, the NSW planning department’s energy, resources and compliance head.

AIE applied last year to modify its original plan in order to increase the terminal’s permitted output and step up the number of LNG cargoes it can receive, to meet seasonal demand for gas retailers such as Origin Energy.

“The modification will allow increased volumes of gas to flow through the terminal, satisfying the market need for more gas during winter months,” AIE said in a statement.

The project has lined up the country’s no. 3 gas retailer, EnergyAustralia, as its first customer. It has also booked a floating storage and regasification unit and contractors to build wharf facilities.

AIE wants to lock in at least four or five large industrial gas users and one or two major gas retailers as customers, and win federal backing for its own gas-fired power station before going ahead with the terminal, project head Peter Mitchley said.

While the coronavirus pandemic has hampered talks, he said that the collapse in gas prices has boosted interest in the project.

“We’re seeing more interest in the regas terminal because there’s a fear about what the low price means for upstream gas production,” Mitchley told Reuters.

AIE’s Port Kembla import terminal is one of four projects aiming to bring gas into southeast Australia to fill a looming shortage.

Reporting by Sonali Paul; Editing by Kenneth Maxwell and Sherry Jacob-Phillips