Duke Energy International and GPU GasNet have formed an alliance to build a A$250 million gas pipeline extending 670 kilometres from western Victoria to Adelaide, the companies said yesterday.

The companies reached an alliance after separately pursuing plans to build a pipeline from Victoria's southwest to an energy hungry South Australia. The pipeline would have an initial capacity of about 45 petajoules and would deliver first gas around the end of 2003, pending finalisation of commercial negotiations with customers.

"I think this is a significant step. The combined efforts of a Duke International and a GPU put a lot of momentum behind a project," Duke's group general manager commercial development Phil Grigsby told Reuters.

"We have both proven we know how to build pipelines, we know how to operate pipelines and I think it is good for South Australia." The South Australian government said last month that Duke and GPU were among five different groups looking at boosting gas supplies into the state, which now relies on the declining central Australian Cooper Basin.

Consortium South East Australia Gas Pty Ltd (SEA Gas) was named earlier in the year as the government's preferred proponent in a non-exclusive process to boost state gas supplies.

SEA Gas is an alliance of Origin Energy Ltd, Australian National Power and the South Australian Magnesium Project (SAMAG). Australian National Power, an International Power Plc unit, and SAMAG would be foundation customers for the SEA Gas pipeline and plan to source gas from the undeveloped Minerva field offshore Victoria, 90 percent owned by BHP Ltd.

Duke said TXU Australia Ltd, one of the largest gas South Australian consumers through its Torrens Island Power Station, had expressed strong interest in securing capacity on the Duke/GPU pipeline.

Talks are also continuing with other potential customers and it is hoped to firm up demand over the remainder of the year, with construction start targeted for late 2002. South Australia's total gas consumption is around 105 pj according to data from a recent industry conference, but there is a shortage of gas supply for new demand.

Grigsby said gas for the pipeline from Victoria could be sourced from the Gippsland Basin or gas fields proposed to be developed in western Victoria, including new Otway Basin discoveries over the past month.

"We have not signed up any alliance to actually buy commodity gas into that pipeline. It is really a decision for producers, shippers and customers of the pipeline," he said. Timor Sea gas producers are also looking at the prospect of supplying gas into South Australia as they look for markets beyond the Northern Territory.

Epic Energy is planning a A$1.5 billion pipeline to link Darwin and the Moomba gas hub from 2004.
Grigsby said the Duke/GPU pipeline would increase the opportunities for competitive supply between Australia's major gas producing basins.

"Ultimately the market will determine which projects go forward. We are pretty confident about ours," he said.