Weston Energy boss Garbis Simonian has welcomed plans for a $589 million gas import terminal in Newcastle but says the market will decide if the project is viable.
Mr Simonian queried on Wednesday whether importing gas would be too expensive compared with domestic sources, principally Santos' proposed $3 billion coal-seam project near Narrabri.
Newcastle GasDock Company, a subsidiary of South Korean firm EPIK, plans to build the terminal in the Hunter River's South Channel, between the Kooragang Island coal loaders and the Tourle Street bridge.
The NSW government on Wednesday declared the project critical state-significant infrastructure, which gives it high planning priority.
Acting Premier John Barilaro said the terminal could help replace energy supplies lost when the Hunter's Liddell power station closes in 2023.
EPIK's executive director of corporate strategy, James Markham-Hill, told the Newcastle Herald on Wednesday night that the company was talking to global gas traders about long-term contracts to ship LNG to Australia via Newcastle.
"We have a number of competitive advantages," he said while attending a dinner in Newcastle where NSW Planning Minister Rob Stokes addressed business and community leaders.
"Newcastle is an ideal place for new supply, being at the end of the existing pipeline.
"You have a heavy industrial region, you have the single largest gas user in the state and the single largest power user in the state all in proximity to the port."
If they can be competitive, good luck to them.Garbis Simonian
He said EPIK hoped to lock in contracts with LNG traders looking to access the Australian market before making a final investment decision in the first half of next year.
"Australia benefits from being in the southern hemisphere, so you have the advantage of reverse seasonal pricing, meaning that LNG pricing globally is based off northern hemisphere pricing."
The terminal would take about a year to build and could be open by mid-2021, potentially giving the government a quick remedy for its growing energy supply and pricing headaches.
Orica's Kooragang Island ammonium nitrate plant uses between 10 and 15 per cent of the state's gas supply, and Tomago Aluminium uses 10 per cent of the state's electricity.
AGL has proposed building a 252-megawatt gas-fired power plant near Newcastle to replace Liddell.
Mr Simonian, the managing director of Hunter-based gas retailer Weston, praised the government for encouraging competition in NSW's energy market, which relies on other states for 95 per cent of its gas.
"The government obviously want more players, which is great, but ultimately the market will decide," he said.
"If they can be competitive, good luck to them."
Mr Barilaro said a Newcastle terminal would provide up to 80 per cent of NSW's gas needs at a time shortages were driving up prices.
Mr Simonian agreed with past statements by Santos boss Kevin Gallagher that the Narrabri project, which could supply half NSW's gas needs, would be a cheaper source than importing LNG.
"To get gas, turn it into LNG, that costs quite a bit of money, and greenhouse gases. And then to heat it up again, and transport it," he said.
"It's just commonsense that it's going to be more expensive than gas that's coming out of the ground. And transport by pipeline is much cheaper.
"They're [EPIK] saying they can buy spot [price] gas. The problem is spot gas is short-term, and the customers want long-term gas contracts for three years, five years or longer.
"The problem is, when you try to buy LNG long-term, they want a higher price.
"I think the answer is domestic gas out of Narrabri."
Mr Markham-Hill said EPIK's proposed gas terminal was similar in design to AGL's plans for a floating storage and regasification vessel in Victoria.
"The infrastructure is fairly simple," he said. "What you have is a storage vessel, a regasification unit then infrastructure to connect to the existing network.
"That said, it's still a significant investment. The onshore piece of that infrastructure is up to approximately $250 million."
Mr Simonian said Weston would investigate whether buying imported gas was viable.
"There may be times of the year when there's a shortage, like in winter, where it may stack up. But it's too early to tell. And we'll see what Narrabri gas sells for. It's all competition. Fully support it."
The federal Shadow Minister for Agriculture and Resources, Hunter MP Joel Fitzgibbon, said the terminal was a "good thing" if it could meet environmental and safety standards and if the government did not use it as an "excuse to dither further" on the Narrabri project.
Port of Newcastle chief executive Craig Carmody and Hunter Business Chamber boss Bob Hawes said the gas terminal was an important project as the region diversified its economy.
"Energy security and affordability have long been major issues in the Hunter, particularly for industry, as our region has some of the biggest commercial users in the state," Mr Hawes said.
"Our members constantly tell us that energy costs and reliability of supply are among their biggest business constraints."