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Japanese companies in consortium to bring LNG to Australia's east coast

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LNG Industry,

Reuters are reporting that a consortium including Japan’s JERA and Marubeni Corp is aiming to ship LNG to Australia’s east coast, looking to supply industrial gas users and possibly a new power plant.

This is the second proposed LNG import terminal for Australia, the world’s second largest LNG exporter, as the country grapples with a supply gap at a time when its gas producers have locked in long-term contracts to sell LNG to Japan, China and South Korea.

A final investment decision is expected this year on the project to import up to around 2 million tpy of LNG starting in 2020.

The LNG receiving terminal would be able to meet up to three-quarters of the gas needs of Australia’s most populous state, New South Wales, where manufacturers like BlueScope Steel and Orica have major operations.

Baulderstone said the consortium would probably charter an existing LNG import vessel, at an estimated cost of around US$30 million to US$35 million a year, rather than building a new floating storage and regasification unit (FSRU).

That is a fraction of the billions of dollars that would be needed to develop a new gas field and pipelines to supply the equivalent volume of gas, 100 petajoules a year.

The proposed new LNG import terminal would be located at either Port Botany, Port Kembla and Newcastle, all of which are close to existing gas pipelines, helping to keep down costs.

Australian Industrial Energy’s investors, as first reported by the Australian Financial Review, are mining billionaire Andrew Forrest’s Squadron Energy, Marubeni and JERA, the world’s biggest LNG buyer, which is a joint venture of Tokyo Electric Power Co and Chubu Electric Power Co.

They said they would work with Squadron on the feasibility study, including marketing to potential customers and tapping JERA’s global network to line up LNG supply.

General Electric Co is providing technical support and design services for development and construction of a gas-fired power plant.

Australia’s top power generator, AGL Energy, is also considering building an LNG import terminal off neighbouring state of Victoria, to bring in up to 2.5 million tpy, but that would mostly meet its own needs, supplying its gas-fired power stations and households.

While LNG is cheap at the moment, prices are expected to rise in the early 2020s, which could make it difficult to justify imports to Australia.

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