The Port Kembla Gas Terminal (PKGT) is set to play a critical role in securing New South Wales’ gas supply, with Australian Industrial Energy (AIE) signing a 25-year lease with NSW Ports.

AIE, part of Squadron Energy Group, is also pursuing 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 Fortescue Metals Group and other hydrogen suppliers bring industry scale production online. 

With a forecast capital cost of $250 million, construction of Australia’s first ever gas terminal could see subcontracts worth around $76 million awarded to local businesses in the Illawarra.  

The PKGT will create around 130 to 150 jobs during construction and between 40 to 50 ongoing roles during operation, as well as contributing to the diversification and growth of Port Kembla and the Illawarra region. 

The lease agreement includes a ten-year initial term with options to extend up to a maximum 25-year term. 

AIE will immediately start a site handover process, paving the way for the new gas terminal  construction works to commence. 

Construction of the PKGT is forecast to take only 18-20 months, putting the project on track to supply more than 75 per cent of NSW’s gas needs by the  end of 2022. 

This cements the PKGT as the only project in the eastern states with a potential timeframe to assist the NSW State Government to meet the terms of its recent MOU with the  Commonwealth to inject an additional 70 petajoules of gas into the east coast market to meet predicted shortfalls. 

Squadron Energy CEO, Stuart Johnston, said the agreement with NSW Ports further clears the way for agreements between AIE and future gas supply customers to be completed in the coming months.  

“We have long recognised Port Kembla as the best site for this critical gas project and with the lease for the terminal now agreed, commercial arrangements around future supply contracts can be accelerated with confidence,” Mr Johnston said.  

AIE Chairman, Michael Masterman, said the PKGT demonstrates the important role of natural  gas as a transition fuel toward a low carbon future. 

“Our commitment to delivering Australia’s first gas terminal is about reinforcing grid reliability  today and investing in carbon-free technologies that support a more rapid decarbonisation of the economy,” Mr Masterman said. 

The PKGT is strategically located in an existing industrial port with experience in hydrocarbons. 

The terminal will be located a short distance (6km) from the existing Eastern  Gas Pipeline (EGP) which provides a major natural gas arterial between Victoria and NSW.  

AIE acknowledged the strict requirements of the Development Consent granted by the NSW  State Government, including the environmental guidelines around the marine environment, and are committed to meeting these over the lifetime of the project. 

NSW Ports CEO, Marika Calfas, welcomed AIE’s long-term commitment to Port Kembla.  

“The gas terminal brings a new trade to Port Kembla and provides significant opportunity for  the region,” Ms Calfas said.

“It will also address future energy needs in NSW and other states. 

“We commend AIE and Squadron Energy’s commitment to using local businesses to create value and jobs throughout the Illawarra region.”

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