The LNG Import Terminal Race

2018 has been a year where the word Collaboration and working smarter and more efficiently as in industry has been a main discussion point. In light of this, it is interesting to see three competing LNG import terminal projects trying to get developed on the East coast.

Interestingly, at AOG this year in the Collaboration Forum Mark McGowan reminded us that not long ago, 3 LNG Plants were built by three different companies sitting next to each other with triplicate infrastructure and this was not working either smartly or collaboratively. In the words of Dan Hayes, Director and Engineering Manager at Atteris – Australian companies need to look out for each other and climb the mountain together to become globally competitive.

The idea of an LNG import terminal is being considered as a way to help elevate increasing and ongoing domestic gas shortages on the East Coast mainly from declining production of the Gippsland Basin (JV owned by ExxonMobil and BHP Billiton). This JV estimates production will fall to just half of the 2018 levels by 2022. The impact of the shortage will be further intensified by also needing to meet the requirements of long term LNG export supply contracts.

The first LNG import terminal announcement was from AGL at the end of 2017. This was in response to the initially discussed costs of building a natural gas pipeline from the West coast to the East coast being as high as $5 billion dollars. The pipeline would potentially run 1,500 km’s and have an end price of between $8 and $13 per gigajoule of gas. Due to costs, the pipeline option is not viable.

The proposed AGL import terminal location would be at Crib Point in Victoria which it anticipates would start importing LNG by 2021. FID is expected end of 2019 and it estimates are that the development would cost at around $250M with an end price of around $10 per gigajoule of gas.

Next, Andrew Forrest’s Australian Industrial Energy (AIE) with the backing of JERA announced it would build a floating LNG import terminal in Port Kembla NSW to supply both NSW and VIC. This regasification facility is estimated to cost between $200M and $300M. FID is expected end of 2018 and would be importing from 2020 with likely end gas prices around $8 - $12 a gigajoule.

Most recently, ExxonMobil has announced it too is also considering an LNG import terminal in Victoria to help plug the looming gas shortage and protect its market share. FID is expected end of 2019 and it is anticipated this facility would be open by 2022.

It will be interesting to watch how these rival projects develop. One thing is certain, Commercial Analysts and Modellers will be kept busy re-analysing and modelling different scenarios as the situation continues to change and evolve over time.