NSW LNG imports to shake up competition: Baulderstone
Angela Macdonald-SmithSenior Resources Writer
Updated Mar 1, 2018 — 8.02pm, first published at 3.55pm
Keen appetite among manufacturers for a new entrant in gas supply would keep an audacious new plant to import LNG into NSW on track, even if its schedule slips behind AGL Energy's rival project in Victoria, according to the executive in charge.
James Baulderstone, head of Australian Industrial Energy, said that while AGL's import project would entrench an incumbent in the market, AIE would be a completely new entrant, with a focus on the "forgotten" sector of commercial gas buyers suffering from sky-high prices.
"There's no point in my mind of having more gas going into the same people who control the market now," Mr Baulderstone said, speaking publicly for the first time on the project revealed in The Australian Financial Review.
Port Botany is the third choice for AIE's proposed NSW LNG import terminal. Thomas Fasting
"Why wouldn't you want someone else to buy from? If you want a lower price you need more competition."
AIE, backed by iron ore billionaire Andrew Forrest, has an ambitious end-2018 target for a final go-ahead on the $300 million LNG import terminal, which would be built at either Newcastle or Port Kembla and starting by 2020. AGL's project at Crib Point in Victoria is following a slower schedule, with start-up in 2020-21, but is thought to have been subject to more detailed work.
But beating AGL to construction shouldn't be the key to success for AIE, which also includes the world's biggest LNG buyer, Japan's JERA, Marubeni and GE.
"If we get delayed I think we're still there; I think the manufacturing sector is going to want to buy from a new entrant," Mr Baulderstone said.
"We'll get a coalition of the willing, then we're going to go forward. We have nothing to protect, we just want to facilitate more gas."
He said that after talking with buyers for the past six to nine months, recent publicity around the project had brought a fresh wave of interest, with talks under way on a variety of potential deals, from equity investment, to gas tolling or pure gas sales.
Mr Baulderstone said that with prices from the terminal gate likely to be $9-$12 a gigajoule, many small industrial buyers which are paying closer to $20 were keen to talk.
AIE wants to secure indicative offers for 40 petajoules a year of gas from industrial buyers to proceed with design work. A further 20-30 PJ is likely to go to a new gas-fired power station, potentially also built by AIE, with the rest of the 100 PJ capacity likely to be sold into the retail market.
"If I can get enough buyers willing to underpin the initial volumes then we can do this," he said.
Mr Baulderstone told a gas conference in Sydney the project would be as if a giant gas field had been discovered right off the coast of the city, or like a "virtual" pipeline that could move to pick up the cheapest gas available worldwide.
A 500-800 MW power plant is "absolutely" part of the plan, whether built by AIE in a joint venture or by a third party, he said. With gas at $10/GJ, a state-of-the-art generator could supply at $80 a megawatt-hour, less than current spot prices, even at only 50 per cent utilisation.
Credit Suisse energy analyst Mark Samter told the coinference that LNG imports into the south-east - whether by AIE or AGL - was the "only logical solution" to help solve the east coast gas shortage, which was only going to get worse. He said building a $5 billion-$6 billion pipeline from Western Australia to the east coast, as outlined by former WA premier Colin Barnett, would constitute "a total destruction of value".
AIE's suggested price for gas from its project is still well above the $5-$6/GJ that some manufacturers say is all they can afford.
Angela Macdonald-Smith writes on the resources industry with a focus on energy, including gas, oil, electricity and renewables. Connect with Angela on Twitter. Email Angela at amacdonald-smith@afr.com