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With Australia set to be the world's biggest LNG exporter it has left a domestic supply gap with fulfilling export contracts. Australian utility AGL Energy will invest around A$250 million (US$190.9 million) in its LNG import facility off Melbourne to cover future gas supply.

LNG Ship

AGL's facility is one of three Australian LNG projects planning to use imports to meet demand as domestic production has been burdened by a lack of investment from the commodity price crash, constraints on exploration and a strong environmental backlash. 

"We see the [east coast] natural gas supply gap growing from around 0.5 million mt/year upto 2 million mt/year by 2025, and growing exponentially thereafter," Phaedra Deckart, AGL's general manager for energy supply and origination, said on the sidelines of the S&P Global Platts LNG & Natural Gas Markets Asia conference in Singapore.

Deckart said the supply shortfall for the east coast market out to 2035 was 2100 petajoules or 39.9 million mt. This gap will need to be met by domestic supply or LNG imports.

What we have seen in Australia is completion of LNG export projects and record export contracts but not a ramp-up in domestic production.

Australia LNG March 2018

"We are encouraged by the number of other projects that have been announced, which adds weight to what AGL has been saying for a number of years -- that LNG imports are needed to come to market," Deckart added at the conference in Singapore.

AGL expects the A$250 million project cost to cover the long-term lease for pipeline transportation and FSRU charter party agreements. Deckhart said "We have sufficient gas to meet our customer demand until 2020-2021, then we need to bring in new supply to the market. We are focused on a mid-term [five years] strip of gas supply as the first tranche into the project,"

LNG from projects in Western Australia and Northern Territory were valid candidates however AGL is indifferent to where gas imports come from reported Platts, as long as they meet Australian power market specifications and are competitively priced.. AGL had invited bidders for an FSRU vessel with a capacity of 140,000-170,000 cu m and has shortlisted some companies for final negotiations.

The falling price of renewables and replacement of coal fired plants by as is driving Australian LNG import plans. Renewables were more competitive than new coal-fired plants and were becoming competitive against existing ones, Deckart added.

AGL plans to shut the near 50-year-old Liddell coal-fired station from 2022 planning to replace with a mixture of renewables.

The company also plans to replace it's peaking capacity either from gas-fired stations or renewables.

AGL was focused on investing in fast-start gas-fired peaking generation, especially when renewables were not available to the market, Deckart said. It produced around 38,586 GWh of electricity from coal in fiscal 2017, 2,827 GWh from gas, 834 GWh from hydro, 2,271 GWh from wind and 354 GWh from utility scale solar.

AGL expects a final investment decision on its Crib Point LNG import terminal in fiscal 2019, and first gas by fiscal 2021.

Source: Platts

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