Tasmania has taken a step towards ending its traditional reliance on hydropower with the announcement by the government that the US company Duke Energy Corp has been selected as the preferred developer of a natural gas infrastructure in the state. The US company was selected from a field of seven companies and one consortium.

Duke Energy will explore the feasibility of buying gas from Bass Strait leaseholders and establishing the necessary gas transmission system and power generating plants. The government believes it will mark the biggest change in the Tasmania electricity market since hydro generation was introduced early this century.

The US company is to report back to the government in six to nine months time.

It is also expected to start negotiating with potential gas suppliers and with potential customers.

Among the latter are Crest Resources which is planning a $700 million magnesite mining project in northwest Tasmania. Crest has indicated it does not believe magnesium production can proceed without the availability of gas.

According to government estimates it would require a 280 km long pipeline of to bring gas from Victoria Tasmania, a modest distance by international standards. If Duke Energy can bring gas to the state at a competitive price, many other projects are likely to proceed too, it believes.