Amid reminders of Australia’s industrial past, including blast furnaces and coal stockpiles, a major energy infrastructure project is underway at Port Kembla, south of Sydney. The $1 billion liquefied natural gas (LNG) import terminal is set to address a projected shortfall in gas supplies on Australia’s east coast, with the facility expected to begin operations by 2026.
According to the Australian Energy Market Operator (AEMO), a decline in domestic gas reserves, particularly from Bass Strait and central Australian fields, is creating a supply gap that could impact energy availability in states such as New South Wales, Victoria, and South Australia. The shortfall could lead to higher energy costs and potential supply issues during peak winter demand.
A Response to Declining Domestic Supply
The import terminal is being developed by Squadron Energy, a company controlled by iron ore magnate Andrew Forrest. Squadron Energy CEO Rob Wheals described the gas supply outlook as “critical,” highlighting the urgent need for additional capacity to stabilize the energy market. The facility will convert imported LNG into gas and inject it into the domestic pipeline network, with a daily capacity of up to 500 terajoules—enough to meet the peak winter demand of New South Wales.
Rick Wilkinson, CEO of consultancy EnergyQuest, emphasized the importance of the project, noting that supply shortfalls have outpaced the decline in demand. While some consumers and industries are shifting toward renewable energy and electric alternatives, these changes are not occurring quickly enough to offset the reduced supply of gas.
Diverging Perspectives
The project has sparked debate. Proponents argue that gas is essential for supporting manufacturing, heavy industry, and electricity generation as the country transitions to renewable energy. They also point out that the terminal offers a flexible solution, with the potential for repurposing or relocation once the energy transition progresses.
Critics, however, view the move as a continuation of fossil fuel dependency, potentially undermining efforts to reduce greenhouse gas emissions. They argue that Australia’s position as one of the world’s largest gas exporters underscores an “artificial” supply issue, as significant quantities of gas are exported under long-term contracts.
Government Involvement and Future Outlook
The federal government has acknowledged the role that LNG imports could play in stabilizing the energy market. However, Federal Resources Minister Madeleine King has expressed concerns about the high costs associated with LNG transportation and regasification, reiterating a preference for developing gas fields closer to consumption centers.
Squadron Energy is in discussions with both domestic and international stakeholders to secure LNG supply agreements. Potential sources include the United States, Canada, Qatar, Papua New Guinea, and Asia, where demand fluctuates seasonally.
Looking ahead, Squadron officials believe the terminal will provide critical energy infrastructure, enabling New South Wales to become more self-reliant in gas supply while supporting the broader transition to renewable energy.
The project also highlights broader energy challenges, including the need for investment in domestic energy infrastructure and policies to ensure reliable and affordable supply as Australia navigates its energy transition.
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