LNG import terminals: Analysts in favour

Energy News Bulletin | Helen Clark  | 13 June 2018

Though lobby groups like APPEA and frustrated explorers repeatedly point to varied onshore exploration moratoria and bans tightening gas supply to the point of crisis on the east coast analysts broadly seem to think one, or even two, LNG import terminals are workable solution.

Managing Partner – Martin Wilkes

Last week Andrew Forrest announced that his plans for shipping LNG to New South Wales had progressed with his Australian Industrial Energy consortium choosing Port Kembla as a location and the signing of 12 memoranda of understanding for long-term supply contracts with industrial customers.

Yesterday AGL Energy announced progress on its own LNG import terminal plans in Victoria, signing pipeline and gas sales agreements with today’s takeover target APA Group and a jetty agreement with port authorities.

RISC Advisory partner Martin Wilkes told Energy News today that he had seen the value of the idea since 2016 when frac bans began.

“To me LNG import has always seemed sensible if a little counter intuitive,” he said, pointing to the seemingly odd case of the US importing a cargo from the UK given it is “madly building LNG export facilities… [but] there is basically a traffic jam to getting gas into the Boston area in winter”.

“It’s a great analogy for eastern Australia, we may have the gas but getting it to where it is needed is going to be difficult.”

Whether two regas facilities are too many is debateable: if one FSRU can produce around 500 terrajoules a day, supplying 25% of demand then Wilkes suggests one may be enough.

APA’s proposed pipeline would have a 500TJpd capacity, it said yesterday.

However, Graham Bethune, head of Adelaide-based EnergyQuest, reckons that “the potential supply gap is significant enough to need two terminals” but does not know where the supply will from, suggesting a lot will have to depend on cabotage regulations.

Wilkes thinks that PNG is the best bet going on physical location but it will really come from portfolio players.

He is bolstered by the fact that Horizon has previously talked about supplying PNG gas east.

Energy News contributor Jeanette Roberts last Friday suggested that WA’s gas was best placed to head to east  as LNG and not in a transcontinental pipeline.

What the terminals will do is reduce reliance on piped gas from Queensland, something noted by AGL yesterday in its mention of the “volatile” markets.

Wood Mackenzie head of Asia gas and LNG Nicholas Browne says LNG will give Victorian energy companies “greater leverage to broker lower pipeline tariffs which will lower the price of wholesale gas for Victorians”.

“There is likely to be significant spare domestic LNG capacity for the foreseeable future. Given this, diversion of LNG feedgas away from exports to the domestic market will provide the marginal source of gas in Queensland.

“Hence domestic gas prices will start to be driven by international LNG prices in any case.”

The move to international prices is not new either.

The Australian Competition and Consumer Commission began publishing the netback prices on its site last month in a move to aid transparency.

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