Gas pipeline owner Jemena is pushing ahead with a $130 million spend to connect Andrew Forrest’s planned LNG import terminal at Port Kembla to its east coast gas grid, in full confidence gas imports will start up by January 2023 despite a lack of signed-up customers.

Managing director Frank Tudor said the project would bring in gas ahead of when shortages risked impacting Victoria, to where Jemena would be able to send gas through its Eastern Gas Pipeline which runs from Victoria’s biggest gas plant at Longford to Sydney.

LNG tankers would park up alongside the floating terminal at the wharf at Port Kembla. AIE

He said Jemena had “every confidence” in the Australian Industrial Energy (AIE) venture owned by Mr Forrest’s company Squadron Energy going ahead with the terminal, pointing to the significant financial commitments it has already made in leasing land at Port Kembla on NSW’s Illawarra region and preparing to construct the project.

“We are pretty confident in them working through what they need to do both to develop the terminal and to ultimately contract with people who are going to be using the terminal to supply gas into Victoria and NSW, Mr Tudor told The Australian Financial Review ahead of the formal announcement on Thursday of a project development agreement between Jemena and AIE for the connecting infrastructure.

“As you get closer to the date we need gas by, things start to fall in place and people conclude their agreements and start to focus on construction.”

The news of the agreement, which firms up a preliminary accord signed between Jemena and AIE last year, comes ahead of an expected renewed warning from the Australian Energy Market Operator as early as next week on the need for LNG imports to avoid the risk of Melburnians suffering gas shortages as early as winter 2023 as Bass Strait output declines.

Although Australia is the world’s biggest LNG exporter, Victoria in particular faces potential shortfalls, thousands of kilometres away from LNG export terminals in Gladstone, Darwin and Western Australia.

Unpredictable declines

AEMO’s annual Gas Statement of Opportunities, due by the end of March, is expected to point to the risk that some fields in the Bass Strait may suffer unpredictable output declines, leaving Victorian consumers vulnerable to supply disruptions when demand is at its highest.

Jemena’s $130 million investment includes $70 million in a 12-kilometre underground pipeline to connect the terminal to its 797km Eastern Gas Pipeline, and work to make the EGP “bi-directional”, so it could send gas south to Melbourne as well as north to Sydney.

Mr Tudor anticipates “boots on the ground” in July or August this year, with construction taking place from the December half, creating 180 jobs across the pipeline and terminal.

On completion, the EGP will be able to deliver more than 390 terajoules of gas a day into the Victorian market, and up to 485 terajoules a day north to NSW.

The Port Kembla project is the most advanced of six LNG import terminals proposed around the south-east coast, most recently by Dutch oil storage group Vopak, at Avalon on Port Phillip Bay.

AGL Energy’s Crib Point project was the first to be mooted, but has been stuck in a planning dispute, with a decision due next week from Victorian planning minister Richard Wynne.

NSW government support

Viva Energy is proposing an LNG import terminal at its Geelong refinery site, while South Korean firm EPIK has a project in Newcastle, and Venice Energy a $200 million proposal in Port Adelaide.

Analysts expect two to go ahead at most, with one likely still needed in Victoria even if the Port Kembla plant is built.

“The more the merrier, but we wouldn’t underestimate the approvals that are required to put the terminals in place,” Mr Tudor said, noting Port Kembla has all its environmental and development approvals and is supported by the NSW government.

Jemena also has a plan for a $400 million expansion of the EGP north into the Hunter Valley to supply potential new gas-fired generators and could be involved in infrastructure to support Squadron’s potential $1 billion gas and hydrogen-fired power station at Port Kembla.

“We’re looking closely at forecast changes across the NEM, and are talking to a range of parties about how we can support additional gas-powered generation across NSW, be that at Port Kembla or in the Hunter region,” Mr Tudor said.

Interest in LNG imports into the south-east has surged even as local gas development projects are being pursued such as Santos’ Narrabri coal seam gas venture in northern NSW. Meanwhile, the idea of a pipeline to eastern Australia from the west coast was recently revived by private outfit Western Gas, which signed an MOU with Jemena’s key rival APA Group to study supplying gas from the Equus fields off the WA coast to east coast customers.

Mr Tudor said he did not regard a west-east pipeline as competitive with current domestic and LNG supply sources on the east coast but that such a project would “compete on its merits”.

Extracted in full from: