The state government of New South Wales, Australia, has given top-level “Critical State Significant Infrastructure” status to move forward with a $500 million liquefied natural gas (LNG) import terminal at the Port of Newcastle.
“Critical State Significant Infrastructure” projects are high priority projects “essential” for the state of New South Wales on economic, social or environmental grounds. They are usually large, expensive and high value projects.
When a project is deemed to be “Critical State Significant Infrastructure” (CSSI), planning processes and decisions are moved out of the hands of the local council and are decided by the state minister of planning with the assistance of his or her department. The planning process is streamlined.
Project proponents have to apply to the state planning minister for this designation. The NSW Minister for Planning and Public Spaces, Rob Stokes, approved the LNG gas import terminal application.
Industry reactions
NSW’s Acting Premier, John Barilaro, commented, “the terminal could be operational by 2022-23 and provide supply for gas-fired power stations, helping to manage energy security during the period in which the Liddell [coal-fired] power station is scheduled to close. This LNG terminal would significantly address this risk and help secure a reliable and affordable future for NSW’s gas supply.”
The Port of Newcastle said that the announcement recognises the need to “significantly” increase local natural gas supply, promote competition and “put downward pressure” on the local price of natural gas. Port of Newcastle CEO Craig Carmody commented, “this is a critical future-proofing project for the region. Projects such as the EPIK Newcastle GasDock project open a number of new trade opportunities, develop capability and support businesses and jobs across the Hunter Region and around New South Wales.”
The proponent of the project is South Korean company, EPIK.
EPIK Founder and Managing Director Jee Yoon said the company was pleased with the project’s momentum. “EPIK’s primary objective is to deliver the most competitive infrastructure solution for natural gas imports into NSW. With CSSI status in hand, we are a considerable step closer,” Yoon said.
He added that the Port of Newcastle was chosen because of its location close to “significant industrial gas and power users, and access into the Sydney Short Term Trading Market, allowing natural gas imported through the Newcastle terminal to reach users throughout NSW and [the] broader southeast Australian market at a competitive price point.”
EPIK’s Newcastle GasDock
In summary, the Newcastle GasDock project is a proposal to import and berth a 170,000 cubic meter LNG floating storage and regasification unit (FSRU) at Newcastle’s Kooragang Island. The FSRU would connect to Australia’s east coast gas network.
When it is up and running, EPIK’s Newcastle Gas Dock import terminal would expand the locally available natural gas supply in New South Wales by 110 petajoules.
EPIK announced in December 2018 that it had entered into an agreement with the Port of Newcastle to build an FSRU at the site. EPIK expects to place an order for the FSRU new-build with a shipyard by early 2020, subject to regulatory approvals.
How to make LNG
An FSRU, as its name suggests, is used to store and/or regasify super-cold liquefied natural gas. The “natural gas” in LNG is the chemical compound methane, which is a gas at room temperature.
Methane is progressively cooled to minus 260 Fahrenheit (minus 161 degrees Celsius). The gas is then subjected to low pressure which causes it to liquefy. At that point of liquefaction the methane has been converted to LNG.
Liquefaction causes a further drop in temperature to minus 260 F and that’s important because, at that temperature, LNG can be returned to normal atmospheric pressure and yet remain in its liquid form. LNG takes up 1/600th of the space used by the gas form of methane. This reduction in volume makes the gas economical to store and transport.
When an LNG carrier arrives at an FRSU, the carrier pumps the LNG into the FRSU which, as the name suggests, stores the LNG until it is needed. Being super-cold, LNG cannot be simply pumped into a country’s gas network so the FRSU progressively warms it, thereby converting it back to gas, by using seawater.
Port throughput diversification needed
Newcastle is acknowledged as the world’s largest coal export port with 158.6 million metric tonnes of coal handled each year and a trade value of A$23,641 million.
By weight, all other non-coal throughput at Newcastle amounts to 6.46 million metric tonnes (a metric tonne equals 2,204.6 U.S. pounds).
That means non-coal throughput at Newcastle amounts to a mere 4.1 percent of its total throughput.
So it’s fair to say that the port is near-wholly dependent on the international coal trade. And that’s a situation that the port wants to change.
“We are working on a number of projects to diversify the Port and support importers and exporters to successfully compete in international markets,” Carmody has said in relation to the FSRU project.
Some of those other projects include, potentially, building a box terminal. But that proposition has its own issues.
International coal and LNG trade
There are many uncertainties around the international coal trade with either existing coal-fired power plants shutting down or planned coal-fired plants simply being cancelled. And that’s across the Americas, Europe and parts of Asia.
Japan in particular had plans to build lots of coal-fired power plants but these are being cancelled. So the port is looking to diversify its business. Especially as Japan is a major destination for Australian coal.
Australia has several LNG import terminals being built or planned, which is somewhat ironic given that Australia is one of, if not by now the largest, producer and exporter of LNG.
Australia exported about 68.6 million tons of LNG in 2018, according to the International Gas Union, in second place only to the Middle Eastern country of Qatar, which exported 78.7 million tonnes.
However, since those figures have been released, more Australian LNG projects have begun operations and LNG export volumes have been boosted to 82 million tonnes per annum. The Australian Government says that Australia has a likely top capacity of about 88 million tonnes per annum. Meanwhile, Qatar’s volumes are expected to remain flat for a few years yet according to the Australian Department of Industry, Innovation and Science.
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