Natural Gas Pipeline Project to Supply Power to Fortescue Metals' Solomon Hub Mines in Australia

Researched by Industrial Info Resources Australia (Perth, Australia)--The Fortescue River Pipeline project is progressing at a strong pace, with ownership and operatorship defined and a key contractor awarded to construct the 270-kilometer (168-mile) natural gas export pipeline.

The pipeline will allow Fortescue Metals Group Limited to use natural gas to fuel the power station at the Solomon Hub iron-ore operations, in the Pilbara region of Western Australia.

FMG Pilbara, a subsidiary of Fortescue Metals Group (FMG), has become the customer, as two companies have created a joint venture to build, own and operate the pipeline that will connect natural gas via the Dampier-to-Bunbury-Natural-Gas-Pipeline (DBNGP) to the Solomon Hub Power Station. The joint venture is known as the Fortescue River Gas Pipeline Joint Venture (FRGP JV), and is made up of DBP Development Group (Perth, Australia), with a 57% share, and TEC Pilbara, a subsidiary of TransAlta Corporation (NYSE:TAC) (Calgary, Alberta), with a 43% share.

The Solomon Hub Power Station is situated at Fortescue Metals Group Limited's Solomon Hub iron-ore operations, in the Pilbara region of Western Australia, near Tom Price. Iron ore is extracted from the Kings and Firetail deposits. Production began at the Solomon Hub in May 2013. The power station has a 125-megawatt (MW) capacity and is currently diesel-powered. Conversion from diesel to natural gas is expected to save FMG about AUD$20 million (US$17.56 million) per year.

The Fortescue River Natural Gas Pipeline will take about six months to construct, with start-up scheduled for the beginning of 2015. The 64-terajoule-per-day (equivalent to roughly 60 million standard cubic feet per day) pipeline will traverse the Pilbara region, near the town of Tom Price. It will be 16 inches in diameter. The total investment value for the project is AUD$178 million (US$156.26 million). Monadelphous (ASX:MND) (Perth, Australia), via pipeline division Monadelphous KT Pipelines, was awarded the key construction contract in January 2014.

The natural gas supply arrangement between the Fortescue River Gas Pipeline Joint Venture and FMG Pilbara is initially for a 20-year term, under a 100% take-or-pay natural gas transportation contract.

For related information see July 31, 2013, article - Fortescue Metals Proposes New Gas Pipeline in Western Australia, and May 14, 2013, article - Production Beings at Fortescue's Solomon Hub in Western Australia

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