Australian Industrial Energy (AIE) and Jemena have signed a Memorandum of Understanding (MOU) to connect the Port Kembla Gas Terminal (PKGT) and the Eastern Gas Pipeline (EGP).

The project is currently on track to supply more than 75 per cent of NSW’s gas needs by the end of 2022.

As part of the MOU, Jemena intends to construct a 12km underground pipeline capable of safely and efficiently transferring gas from the PKGT directly into the EGP – the major natural gas arterial between Victoria and NSW.

As part of the MOU with AIE, Jemena plans to invest over $70 million to build the connecting pipeline and modify the EGP so that it can deliver over 200TJ of gas from NSW into the Victorian market, while being able to supply up to 450TJ of gas per day to NSW – a 25 per cent increase on its current capacity.

Project works are expected to create more than 180 jobs throughout the development and construction phases. 

This is in addition to $76 million worth of subcontracts expected to flow into the local Illawarra community from the PKGT’s construction which will also create around 130 to 150 jobs and between 40 to 50 ongoing jobs during operation, as well as contributing to the diversification and growth of Port Kembla and the Illawarra region.

The MOU with Jemena comes after AIE, part of the Squadron Energy Group, announced it had signed an agreement for lease for up to 25 years with NSW Ports, securing the tenure to allow it to commence construction of the PKGT.

Squadron Energy CEO, Stuart Johnston, said under the MOU, Jemena will provide capacity to deliver 522TJ of gas per day and this moves the PKGT one step closer to delivering critical gas supply certainty for NSW.

“We believe we have secured the best site in Australia for this project and now with an agreement for long-term tenure for the site and a pipeline agreement secured, the PKGT remains the only project in the eastern states capable of assisting the NSW State Government to overcome predicted gas shortages by 2024,” Mr Johnston said.

Jemena’s Managing Director, Frank Tudor, said the MOU with AIE underlined the company’s commitment to delivering affordable gas to the people of NSW and Victoria.

“This is a crucial next step in delivering on our plans to connect the Eastern Gas Pipeline to AIE’s gas terminal at Port Kembla,” Mr Tudor said.

“This project is a win for the local community, and a win for businesses who use gas in their operations. 

“It is not only the quickest and most efficient way of bringing additional gas to market ahead of forecast shortages, but it will also help to place downward pressure on gas prices and stimulate much needed economic activity across regional NSW. 

“Importantly it provides gas users in NSW and Victoria with access to gas at globally competitive prices and will add much needed liquidity and seasonal shape to the market.

“The project also provides additional impetus for us to progress our plans to modify the Eastern Gas Pipeline to make it bi-directional. 

“These plans will allow us to flexibly transport gas between densely populated regions such as Sydney and Melbourne based on demand and the dynamics of the gas market.”

The PKGT comprises the development of a gas terminal incorporating LNG carrier vessels, a floating storage and regasification unit (FSRU), wharf facilities and a pipeline connection to the existing EGP. 

The project received Critical State Significant Status (CSSI) early on in the approval process and remains the only gas terminal in Australia with an existing development consent. 

Reflecting its importance to energy security, the lateral pipeline was included in the NSW Government’s Priority Project List in September 2020.

Squadron Energy is also accelerating the associated development of a dual fuel  – LNG – Hydrogen 800MW power station in the Illawarra to be initially fuelled by gas from the PKGT. 

The design provides for large-scale dispatchable power and the ability to transition to hydrogen fuel as hydrogen suppliers bring industry scale production online.

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