“NSW currently relies on various interstate sources for 95 per cent of its gas needs, which can be less reliable and more expensive. This proposal has the potential to provide long-term security of gas supply at competitive prices.”

Loading

The majority of the gas will be provided to large manufacturers and businesses.

It comes after the Australian Competition and Consumer Commission forecast a looming gas shortage on the east coast of up to 150 petajoules, and the government last year threatened gas companies with a mechanism that would slash exports unless they secured more domestic gas supply.

The new gas terminal is a lower-cost alternative to proposed interstate pipelines and a cross-country, $5 billion West to East gas pipeline, which could also alleviate a gas shortage.

The location of the new east coast gas terminal came down to a decision between two sites - Port Kembla or the Port of Newcastle. AIE chose Port Kembla as it is closer to large consumers of industrial gas as well as existing pipeline infrastructure.

The terminal will have storage tanks capable of holding around four petajoules of gas, equivalent to between 10 and 12 days of NSW’s total demand.

For the second stage of the development, AIE is investigating the construction of a new gas-fired power plant. It is understood this could include either expanding on existing small-scale power plants nearby to provide more energy to industrial users, or building a new 750-megawatt power plant.

Mr Baulderstone said it planned to develop this power generation between 2020 and 2022.

The facility will see LNG carriers visiting Port Kembla around every two to three weeks.

Who is AIE?

Australian Industrial Energy is led by the former Santos and Duet Group executive James Baulderstone, and Stuart Johnson, the head of Mr Forrest’s gas business, Squadron Energy. The consortium has the backing of Japanese firms Marubeni Corp and JERA, which is the world’s largest buyer of LNG.

JERA will supply the gas while trading house Marubeni provides infrastructure financing.

"The $200 million price tag is relatively small capital to these investors," Mr Baulderstone said.

AIE has already signed 12 memorandums of understanding with industrial users for the supply of gas but declined to name these groups.

JERA’s fuel business development and gas and power development senior vice president, Gaku Takagi, said the facility would be able to bring cheaper LNG to NSW.

“We believe we can make a major contribution to NSW and east coast energy supply competition and security,” Mr Takagi said.

Mr Baulderstone said AIE would work as quickly as possible to get the facility off the ground as the rising price of gas stretches Australian businesses' operating costs as they seek new sources of gas supply.

“In recent times, wholesale gas prices have doubled, and in many cases tripled, in NSW. In addition, many industrial companies are now unable to secure gas for any period longer than 12 months,” Mr Baulderstone said.

“AIE is well placed to deliver firm, long-term gas on highly competitive pricing and terms as a soon as 2020.”

The development is a boon for NSW, which has traditionally imported gas for industry and power generation from Queensland.

AIE is planning to lodge its development applications within the next few months.