Australia’s Snowy, Lochard ink Iona gas storage deal

Australian state-owned utility Snowy Hydro has signed a 25-year deal to store gas at the country's largest domestic gas storage in Victoria state to support its gas-fired power stations.

The agreement with the 26PJ (694mn m³) Iona site, owned by domestic gas storage firm Lochard Energy, will commence in January 2028. This will be ahead of the permanent closure of the 1,480MW Yallourn brown coal plant, operated by Hong Kong-owned utility EnergyAustralia, in mid-2028.

"The gas storage agreement with Lochard Energy will support the operation of our gas-fired power stations in Victoria," Snowy Hydro chief executive Dennis Barnes said on 15 July.

Snowy Hydro, which owns and operates three gas-fired power stations totalling 1,290MW at present, is building the 750MW Kurri Kurri gas-fired plant, of which the initial 660MW stage is scheduled to come on line in late 2024.

Snowy's 320MW Laverton North and 300MW Valley Power generators are located in Victoria.

The deal is expected to underwrite the Heytesbury underground gas storage project, Lochard's chief executive Tim Jessen said, which will expand the capacity of Iona by approximately 3PJ.

Australia's southeastern states are expected to face significant shortfalls of gas later this decade as fields supplying Victoria's 1,150 TJ/d (30.7mn m³/d) Longford gas plant deplete. A mixture of pipeline expansions to bring more gas south from Queensland state, LNG import terminals, and reducing demand have been floated to bridge this gap.

Two LNG import terminals are proposed for Victoria but both require environmental approvals from the state government.

Snowy Hydro is facing significant pressure from the federal government over its delayed Snowy 2.0 pumped hydroelectric project, which has suffered significant cost overruns and delays. Snowy last year said the scheme's costs had doubled to A$12bn ($8.1bn) from a previous A$5.9bn estimate, which was itself higher than the original guidance.

By Tom Major