Conservative Jim Molan’s expected return to the Senate is set to be challenged as a candidate backed by the party’s moderate faction gears up to fight for the plum position.

Richard Shields, the deputy mayor at the Woollahra council and former state director for the Liberal party in New South Wales, is understood to have strong support among delegates to win the position being vacated by Arthur Sinodinos, and is widely expected to nominate.

Another moderate candidate, Sutherland Shire councillor Kent Johns, is also considering whether to run for the vacancy created by Sinodinos’s appointment as the next ambassador to the United States.

Shields, the government relations manager for the ­Insurance Council of Australia, ran second in the contest to replace Malcolm Turnbull in the seat of Wentworth, which was won by Dave Sharma.

Johns has twice been thwarted in his attempts to win preselection for the federal seat of Hughes, held by the conservative Craig Kelly, after prime ministerial interventions from Turnbull and Scott Morrison to save the sitting MP.

The likely challenge to Molan comes despite Morrison writing to preselectors supporting Molan’s return to the Senate after the former army general was relegated to the unwinnable fourth position at the last election.

Molan angered many conservatives within the NSW branch after he ran a rogue campaign in the lead up to 18 May to convince people to disregard the Coalition’s Senate ticket and vote below the line.

That diminished factional support for Molan among the 800 delegates who will determine who takes the Senate position.

Another complication is the fact that Shields used to be aligned with the party’s hard right faction, meaning his support base crosses factional lines.

Some moderates are understood to believe they should not run a candidate against Molan because whoever secures the two-year position will be up for renewal in 2022 at the same time as the moderate-aligned foreign affairs minister, Marise Payne, and the conservative Concetta Fierravanti-Wells.

Under the method used to select Senate candidates, it would not be possible for two moderate candidates to be allocated winnable positions, meaning the new senator may only be given a two-year term.

The NSW state executive will meet on Friday to determine a timetable for the Senate vote, which is expected to take place in late November or December after parliament rises for the year.