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Australia's AGL advances plans to import LNG with $200 MM jetty

MELBOURNE (Reuters) — Australia's AGL Energy said on Thursday it has provisionally picked a site in the southeast of the country to build a jetty to import LNG, a project set to cost $197 MM.

AGL, Australia's biggest power producer, said it expects to make a final investment decision next year on whether to build the jetty at Crib Point in the state of Victoria, pending local approvals. It said it sees options for securing LNG supply on long- and medium-term contracts, as well as on the spot market.

The utility first flagged the project last year, when the idea of importing LNG seemed irrational for a country that is set to become the world's top exporter of LNG by 2019. But AGL sees LNG as crucial to boosting gas supply in the country's east, where prices are soaring and gas-fired power is needed to back up wind and solar power as ageing coal-fired plants shut.

"We have been very active in overseas markets talking to a plethora of people who are very, very keen to bring (LNG) to Australia," AGL's wholesale markets head Richard Wrightson said, speaking to investors during an earnings briefing. Producers in Western Australia and the Northern Territory are also interested, he said.

Spot LNG prices are expected to remain weak due to a supply glut stoked by new export plants in Australia and the United States.

Wrightson said if the Crib Point jetty existed today, AGL would be able to deliver gas to Victoria for A$8–10 a gigajoule, well below current prices in the southeast.

"What is really critical about this project is it will get to the point where you will see Australia's prices capped at the international gas price," Wrighton told investors. "We won't have the situation we see currently where Australian gas prices have gone well beyond prices that we see in Asia."

State drilling bans, LNG exports taking gas out of the local market and high pipeline tariffs have all contributed to driving local gas prices above Asian prices, which have dropped due to the global LNG glut.

Reporting by Sonali Paul; Editing by Joseph Radford and Kenneth Maxwell


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FEATURED COLUMNS

Editorial comment
-Adrienne Blume
The ongoing development of shale gas resources in the US has spurred infrastructure construction for both natural gas processing capacity and LNG export terminals.
Regional focus
-Eugene Gerden
Russian natural gas monopoly Gazprom is strengthening its presence in the gas market of the Middle East through the planned construction of an 11-metric-MMtpy–12-metric-MMtpy LNG plant in Iran.


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