* Port Kembla LNG needs to line up gas customers
* Targets final investment decision in mid-2019
* Aims to deliver first gas in late 2020 (Adds Squadron CEO comments)
By Sonali Paul
MELBOURNE, April 29 (Reuters) - Australia’s New South Wales state on Monday approved plans by a Japanese-backed consortium to build a A$250 million ($176 million) liquefied natural gas import terminal at Port Kembla, looking to cut gas prices and avert a supply shortage.
The Port Kembla project is the first of five proposed LNG import terminals in Australia to receive planning approval. All of them are looking to help plug a looming supply shortage expected in the country’s southeast in the 2020s.
Australian Industrial Energy (AIE), the joint venture planning to build the berth for a floating LNG import facility at Port Kembla, about 100 km (60 miles) south of Sydney, said the approval means it can now focus on lining up gas customers.
AIE is aiming to make a final investment decision around the middle of this year.
“This terminal could supply 70 per cent of our State’s annual gas demand and help ease the cost of energy bills for NSW families and small business owners,” New South Wales Energy and Environment Minister Matt Kean said in a statement.
The AIE joint venture partners are Australian mining billionaire Andrew Forrest’s Squadron Energy, Japan’s JERA Co, the world’s biggest buyer of LNG, and Japanese trading firm Marubeni Corp.
If they decide to go ahead with the project in the middle of this year, first gas could be delivered by late 2020, the partners said in a joint in a joint release.
Squadron Energy Chief Executive Stuart Johnson declined to say how much of the project’s capacity of 100 petajoules a year the partners want to have locked into five-year gas supply agreements before making a final investment decision.
The AIE partners want sales to match the LNG volume that JERA, a joint venture between Tokyo Electric Power and Chubu Electric Power, has agreed to supply.
Price discussions are likely to be tough, though, as spot LNG prices have slumped due to a glut in North Asia and are about half the price of LNG term contracts linked to oil prices.
“We believe we’ve got the best priced LNG in the market.
But if someone wants to, for example, take a risk on spot and they want to book capacity on the vessel and (pay a) toll, we’re open to that,” Johnson said.
AIE managed to secure state approval ahead of AGL Energy , which was first to propose importing LNG to Australia. AGL’s project has been slowed by an environmental review in Victoria state.
($1 = 1.4207 Australian dollars)
Reporting by Sonali Paul; Editing by Richard Pullin and Tom Hogue