(EnergyAsia, July 12 2011, Tuesday) — Australia’s new carbon policy will reduce the competitiveness of the country’s natural gas exporters against liquefied natural gas (LNG) producers in Qatar, Malaysia, and Indonesia, said the Australian Petroleum Production & Exploration Association (APPEA).
On Sunday, the government unveiled its much awaited carbon policy to take effect from next July. Its policy treatment of LNG, largely unchanged from its first announcement in November 2009, will initially allow LNG producers to receive up to 66% of their permits, later declining to 50%.
The policy will be reviewed in 2014-15, adding further uncertainty to LNG producers contemplating major investment decisions.
APPEA also criticised the policy for narrowly focusing only on emissions from the LNG plant rather than the entire production process, thus significantly reducing the degree to which producers can access free permits.
APPEA CEO Belinda Robinson said: “While the government is frequently willing to laud the role gas can play in reducing Australian greenhouse gas emissions, it is clear that this acceptance does not extend to export gas.
“The export gas industry rejects the politically motivated label of ‘big polluter’ when for every tonne of emissions produced in liquefying natural gas, up to nine and a half tonnes are removed from the atmosphere when substituted for coal in customer countries.
“Whether used in Australia or exported, gas has a big part to play in reducing global emissions and there is no rational reason for a policy that sees Australian gas use increase but exports constrained.
“It is a policy that risks driving emission reductions in Australia at the expense of greater emission increases elsewhere in the world.
“It is a policy that leaves the industry puzzled by the government’s reluctance to promote – or appreciate – the potential for Australian gas to reduce emissions in countries where reductions are most needed.”
APPEA cited a recent Macquarie Equities report which said that nine of the world’s 10 most expensive (new and proposed) LNG projects are in Australia.
The report concluded that Australian projects are not well positioned to compete “if cost pressures continue to build.”
Ms Robinson said: “Fiscal and labour cost pressures already make Australian LNG projects the most expensive in the world and today’s announcement hurts the industry’s competitiveness even more; and without decreasing net global emissions.
“The announced fuel tax credit reductions of between five and six cents per litre will also affect every oil and gas operation in Australia and cost tens of millions every year.
“Importantly, (the) announcements make no mention of the government’s intentions regarding the 237 other climate change policies and programs already in existence and identified by a range of reviews as the barrier to reducing emissions at the lowest possible costs.
“Unless these programmes and policies are withdrawn, the schemes announced today will simply add to these costly and inefficient programmes.”