The NSW government says a $589 million gas import terminal could be operational in Newcastle in four years after granting the project high-priority planning status.
NSW Planning Minister Rob Stokes will announce in Newcastle today that he has declared the Kooragang Island terminal critical state significant infrastructure.
Newcastle GasDock Company, a subsidiary of Energy Projects and Infrastructure Korea (EPIK), plans to build the terminal in the Hunter River's South Channel, between the Kooragang coal terminal and the Tourle Street bridge.
It would include a 170,000-cubic metre floating storage and regasification unit and onshore infrastructure.
The terminal would supply up to 80 per cent of NSW's liquified natural gas needs via a connecting pipeline to the state's existing gas-supply network, helping to drive down spiralling prices on the east coast.
"The terminal could be operational by 2022-23 and provide supply for gas-fired power stations, helping to manage energy security during the period in which the Liddell power station is scheduled to close," Acting Premier John Barilaro said in a statement to the Newcastle Herald.
"This LNG terminal would significantly address this risk and help secure a reliable and affordable future for NSW's gas supply."
The Department of Planning, Industry and Environment approved a $250 million gas import terminal, backed by businessman Andrew Forrest, for Port Kembla in April.
It is understood the government believes the two competing terminals can co-exist.
NSW relies on interstate sources for 95 per cent of its gas supply.
Mr Stokes said the terminal, if approved, would promote competition between suppliers.
Orica said in March that its ammonia plant on Kooragang Island, which employs 300 people and is one of the state's biggest gas consumers, faced an uncertain future as LNG prices rose.
The government said a Newcastle import terminal would expand gas supply in NSW by 110 petajoules.
EPIK and Port of Newcastle signed an option agreement late last year to start preliminary works on a terminal.
A senior EPIK executive is understood to be flying in from the US for a dinner tonight at Wests City where Mr Stokes will discuss the Hunter region's future.
EPIK founder and managing director Jee Yoon said in December that the company's assessment of the NSW gas market, particularly in coastal regions such as Newcastle and Sydney, gave it confidence in "delivering a cost-efficient source of alternative gas supplies to the region on a long-term basis".
EPIK said at the time that it expected to place an order for the floating storage and regasification unit with a shipyard subject to receiving state government regulatory approvals for the project.
The government said the Newcastle terminal would be subject to "detailed community consultation", despite its designation as critical infrastructure, and the proponent would need to prepare an environmental impact statement to go on public exhibition.
DPIE will assess the merits of the project before making a recommendation to Mr Stokes for a final decision.
Industry sources said the South Channel would require significant dredging to allow ships to operate that far upriver.
The government's decision to fast-track the proposal comes at the same time as energy giant Santos awaits planning approval for its $3 billion Narrabri coal seam gas project, which could supply up to half the state's gas needs but is facing stiff opposition from environmental groups.