(EnergyAsia, July 23 2013, Tuesday) — The Australia government’s decision to continue with a carbon price on the energy and mining sector puts its liquefied natural gas (LNG) industry at a big disadvantage against suppliers in other countries, said the Australian Petroleum Production Exploration Association (APPEA).

The controversial carbon tax was introduced at a fixed price of A$23 per tonne last July, despite the opposition of the country’s powerful energy and mining companies. (US$1=A$1.06).

Prime Minister Kevid Rudd who regained power after toppling predecessor Julia Gillard last month has announced that the carbon price would now be set by market forces based on an emissions trading scheme starting July 1 2014.

But the APPEA has rejected the change as being largely cosmetic in nature as the country’s LNG industry would still be weighed down by a carbon tax which is not applied to any of its competitors in the Middle East, Asia, Africa and even North America. LNG companies said they are losing their edge in Australia on account of the country’s high business and operating costs, tough environmental, safety and health regulations, and inflexible and scarce labour supply.

In observing that there is no international carbon price in operation, APPEA chief executive David Byers said:

“While the move to a floating price may represent a short-term lowering of the price facing liable entities, Australia is still imposing a cost on its gas export industry that will not be borne by any of its LNG competitors. This will diminish its international competitive standing.

“For every tonne of carbon dioxide associated with the production, export and consumption of Australian LNG, up to 9.5 tonnes are avoided in customer countries when LNG is used in place of coal.

“A range of complicated administrative arrangements that have been changed numerous times since July 1 2012 underpin aspects of the scheme – particularly those applying to natural gas liability. It is vital that compliance with the scheme is streamlined and does not impose extra and unnecessary costs on the industry or disrupt existing commercial arrangements.

“The Federal government should take the opportunity presented by these changes to remove the 230 or more other policies and programmes regulating greenhouse gas emissions in Australia.

With seven plants under construction, Australia expects to increase its annual LNG capacity from 24 million metric tonnes to more than 80 million metric tonnes by 2017. This would enable to overtake Qatar as the world’s largest LNG producer and exporter.