AGL brings forward Victorian LNG terminal plan
Summary: AGL Energy has brought forward plans for a $250 million Victorian LNG terminal as it braces for an expected 2021 domestic gas supply crunch, declaring the shortage and associated price hikes could be worse if bad weather restricts growing wind and solar power supply.....
In documents submitted to the Victorian government this week, AGL said it wanted the Crib Point import terminal, 65km southeast of Melbourne on the Mornington Peninsula, operating in the first half of 2020.
This brings forward a “during 2020-21” target issued in June, showing the desire to import gas has not slowed in the wake of last month’s sudden exit of chief executive Andy Vesey.
AGL also disputed recent Australian Energy Market Operator forecasts that the east coast gas market would be oversupplied throughout next decade.
“Victoria, and the other states - South Australia, New South Wales and Tasmania - that rely heavily on gas production from Victoria, continue to have a threat to security of supply and exposure to a gas shortfall from 2021 if there is not a significant discovery of, or significant investment in, new sources of supply coming to market,” AGL said in an environmental effects statement (EES) filed with the Victorian Planning Department.
“The forecast gas supply shortfall raises the prospect of higher and more volatile prices for Australian customers, reflecting competition for scarcer domestic gas supplies. In addition, there is now the potential for an increased need for gas-powered generation due to weather related or contingency events that could still adversely impact this forecast and tighten the supply demand balance once again.”
AGL is the most advanced of four proponents of LNG import terminals targeting east coast gas markets, where prices have risen and supply is tight. The tight markets are due to Queensland LNG export plants, state government onshore development restrictions, declining Bass Strait production and the growing cost of developing new Australian gas supply.
AGL’s EES comments back those last week from the company’s head of wholesale markets, Richard Wrightson. He told The Australian that Victoria faces gas supply shortages in the early 2020s and that the latest AEMO forecasts “optimistic”.
In the environmental documents, AGL outlined its concerns with the forecast.
“AEMO’s report shows many of the supply sources AGL has relied upon to meet the needs of the market and its customers are in decline with future production reliant on contingent and prospective resources that have yet to be proven technically or commercially viable or have development plans attached to them to come to market,” AGL said.
The import terminal will be able to produce up to 790 terajoules a day of gas at peak rates, which is more than Victoria’s total demand, or 527 terajoules per day at sustained rates.
AGL said it expects 12 to 40 LNG ships a year to dock at Crib Point, where it is targeting a final investment decision in the first quarter of next year, in line with a previous target of during 2018-19.
The plan will help “maintain security and stability of gas supply, and keep downward pressure on prices”.
Environment Victoria called for strict state government assessment of the plan.
“We urgently need Planning Minister Richard Wynne to require a full environmental effects statement to ensure Westernport is not sacrificed for AGL’s gain” CEO Mark Wakeham said.
“The emissions associated with producing liquid natural gas for import have not been accounted for in AGL’s referral. Gas expansion is not necessary to secure Victoria’s energy supply and this project will lock in high gas prices.”