APA to build pipelines for AGL's Victorian gas import terminal
Summary: AGL has struck two deals to support its proposed Crib Point floating gas import terminal in Victoria, which is says will help address the state's looming gas crisis.....
(Pictured: Victoria's Crib Point as it is now. AGL and APA plan to anchor the regasification unit off Jetty Berth 2. Photo: AGL)
APA on Tuesday agreed to build the gas transport pipelines while AGL also signed agreements with the Port of Hastings for the long-term use of a berth at the Crib Point jetty.
The Australian Energy Market Operator (AEMO) has forecast a 57 per cent fall in total gas production in the state over the next five years, dropping from 435 petajoules in 2017 down to 187 petajoules in 2022, creating a 19 petajoule shortfall in the winter of 2022.
AGL chief executive Andy Vesey said the terminal, which hinges on AGL reaching a final investment decision on the LNG floating regasification unit and its offshore facilities next year, would help cut high gas prices in Victoria and South Australia.
“The Crib Point import jetty project has the potential to provide AGL with the ability to deliver a new source of gas supply to the southern states of Australia. This will deliver liquidity, increasing competition to put downward pressure on wholesale prices,” Mr Vesey said.
APA managing director Mick McCormack said the project should help alleviate potential gas supply shortfalls in Victoria in 2021-22.
“I’ve said for some time now that the east coast gas issues are about a lack of affordable gas supply, and this solution championed and progressed by AGL certainly goes towards injecting a flexible source of new gas supply into the tight domestic market in eastern Australia,” Mr McCormack said.
Under the project, APA will build about 60 kilometres of new pipeline capable of transporting about 500 terajoules of gas a day. The cost of the pipeline is believed to be between $160 million and $200 million, while AGL’s terminal has been forecast to cost about $250 million.
AGL's general manager for energy supply and origination, Phaedra Deckart, said the project would import around 40 petajoules of gas initially and had already begun signing customers.
Between 12 and 40 ships would deliver gas to the facility a year, depending on demand.
"We have already shortlisted LNG suppliers," Ms Deckart said. "We also recently executed 10 memorandums of understanding with industrial customers for up to 30 petajoules a year."
She said the company had been looking at importing new floating regasification units from Asia or Europe and was already in negotiations.
Despite surging ahead with the project, there are still a number of approvals AGL must receive before it begins importing gas.
"There are still a number of additional steps to work through such as regulation and governmental approvals," Ms Deckart said.
One of the main hurdles for the project is its location close to national maritime parks.
"We are very aware that Western Port is an environmentally sensitive area and many areas within it are covered by the Ramsar international convention on the protection of wetlands," an AGL spokesman said.
"There is already an existing jetty that currently functions for petrol importation. It has an existing deep-water berth that does not require deep dredging and, importantly, it's a relatively short distance from the Victorian gas network.
"Selecting another location would require the construction of a new jetty and significant excavation of the bay floor."
Ms Deckart said AGL would begin its environmental applications later this month.
Environmental group Save Western Port warned of the project's impact to the Western Port wetlands and nearby homes.
"It's totally inappropriate for it to be that close to residences, bushland and adjacent to protected wetlands, other floating import facilities - like that proposed at Port Kembla in NSW - are in industrial areas," Save Western Port spokeswoman Louise Page said.
The Victorian government were approached for comment.
The gas from the project will replace the gap left as Victorian major offshore producers Esso and BHP wind down their Gippsland Basin Joint Venture. The two had increased production to meet growing demand but had shortened the life of the project in doing so, and forecast daily production rates will halve between 2018 and 2022.
This tightness in the market is exacerbated by Victoria's moratorium on all onshore gas exploration, stopping any new gas from entering the market.
These agreements come a fortnight after Fortescue Metals chairman Andrew "Twiggy" Forrest’s Australian Industrial Energy announced it would build a floating LNG import terminal in Port Kembla to bring more gas to NSW and Victoria as soon as 2020.
The Port Kembla terminal will import up to about 100 petajoules of LNG, which could meet about 75 per cent of NSW’s total gas demand.
AGL’s first gas delivery from Crib Point is forecast during the 2021 financial year.