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UPDATE 1-Australia's AGL advances plans to import LNG with $200 mln jetty

CommoditiesAug 10, 2017 13:40
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© Reuters. UPDATE 1-Australia's AGL advances plans to import LNG with $200 mln jetty

* Picks Crib Point in Victoria for jetty site

* AGL says LNG exporters eager to supply Australia

* Sees LNG imports capping local gas prices (Adds executive comments, industry context)

MELBOURNE, Aug 10 (Reuters) - Australia's AGL Energy AGL.AX said on Thursday it has provisionally picked a site in the southeast of the country to build a jetty to import liquefied natural gas (LNG), a project set to cost A$250 million ($197 million).

AGL, Australia's biggest power producer, said it expects to make a final investment decision next year on whether to build the jetty at Crib Point in the state of Victoria, pending local approvals. It said it sees options for securing LNG supply on long- and medium-term contracts, as well as on the spot market.

The utility first flagged the project last year, when the idea of importing LNG seemed irrational for a country that is set to become the world's top exporter of LNG by 2019. But AGL sees LNG as crucial to boosting gas supply in the country's east, where prices are soaring and gas-fired power is needed to back up wind and solar power as ageing coal-fired plants shut.

"We have been very active in overseas markets talking to a plethora of people who are very, very keen to bring (LNG) to Australia," AGL's wholesale markets head Richard Wrightson said, speaking to investors during an earnings briefing. Producers in Western Australia and the Northern Territory are also interested, he said.

Spot LNG prices are expected to remain weak due to a supply glut stoked by new export plants in Australia and the United States.

Wrightson said if the Crib Point jetty existed today, AGL would be able to deliver gas to Victoria for A$8-10 a gigajoule, well below current prices in the southeast.

"What is really critical about this project is it will get to the point where you will see Australia's prices capped at the international gas price," Wrighton told investors. "We won't have the situation we see currently where Australian gas prices have gone well beyond prices that we see in Asia."

State drilling bans, LNG exports taking gas out of the local market and high pipeline tariffs have all contributed to driving local gas prices above Asian prices, which have dropped due to the global LNG glut. = 1.2676 Australian dollars)

UPDATE 1-Australia's AGL advances plans to import LNG with $200 mln jetty
 

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