Page 4 - AsiaElec Week 45

AsiaElec COMMENTARY AsiaElec
Australia’s gas potential suffers as LNG import project faces delays
Australian Industrial Energy’s Port Kembla LNG import plan is being hit by delays as it struggles to lock in buyers for its gas
AUSTRALIA
WHAT:
The Port Kembla LNG import project is facing new delays
WHY:
The project’s backers are struggling to lock in buyers amid falling natural gas prices
WHAT NEXT:
South-east Australia will likely need imported LNG in the longer run despite lacklustre buyer appetite currently
AUSTRALIAN Industrial Energy (AIE) is fac- ing further delays to its proposed LNG import project in Port Kembla, New South Wales, as it struggles to lock in buyers for its gas.
The project is one of five proposed Australian LNG terminals, being planned for the country’s south-east as the region grapples with looming domestic gas shortages even as exports of the fuel from other parts of Australia are booming.
AIE is backed by Japan’s JERA and Marubeni, as well as Australia’s Squadron Energy. Reuters reported this week that industry observers and sources familiar with the matter had said poten- tial buyers were holding off signing contracts after a drop in local gas prices. According to the sources, AIE is stepping up efforts to sign up Origin Energy, Australia’s biggest gas retailer, in a bid to get the project built. The longer talks with buyers go on, the more the proposed import ter- minal will fall behind its initial schedule of deliv- ering first gas in late 2020.
Natural gas derived from imported LNG could also be used as feedstock for power genera- tion in New South Wales, where the fuel in often used a peaking power stations. Gas prices have been high in recent years, although they are now falling as Queensland exporters divert supplies
to the domestic market.
The development marks a further delay for
the project after AIE applied in October to the New South Wales state government to modify the approval for the terminal to allow more fre- quent cargo arrivals during the winter months.
The application resulted in AIE having to push back a final investment decision (FID) on Port Kembla, which had previously been tar- geted for mid-2019. The consortium now has no target date for reaching FID, nor one for first gas deliveries.
Seeking buyers
As of June, AIE had lined up EnergyAustralia as its first customer and booked a floating storage and regasification unit (FSRU), as well as select- ing contractors to build wharf facilities for the AUD250mn ($173mn) project import terminal.
However, since then the consortium has failed to lock in deals with 12 industrial users that had expressed interest in buying gas from the terminal in 2018. Squadron’s CEO, Stuart Johnson, told Reuters that a few of those 12 had since dropped out altogether, though he added that they represented “a very small load”.
This comes as gas prices are falling in
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w w w . N E W S B A S E . c o m Week 45 13•November•2019