UPDATE 1-Australia LNG projects worth $58 bln at risk-Woodside

(Updates throughout with finance minister, Origin Energy comment)

By Rob Taylor

CANBERRA, July 18 (Reuters) - Australia said on Friday it would negotiate with energy firms on a planned national emissions trade scheme after gas producer Woodside Petroleum Ltd (WPL.AX) said nearly $60 billion in liquefied natural gas projects were at risk.

Treasurer Wayne Swan said it was too early to say what impact the 2010 emissions regime would have. Woodside Chief Executive Don Voelte said it would penalise clean gas exports by making it impossible for two A$30 billion ($29 billion) LNG projects in West Australia to proceed.

"We will sit down with the industry and talk with them about the propositions that they have. But at the end of the day, there is no free lunch. The whole point of this scheme is to protect our national interest," Swan said.

Voelte said the centre-left government's cap-and-trade emissions scheme, aimed at fighting climate change and unveiled this week, could hit clean LNG exports to energy-hungry China.

"This emissions trading scheme will knock planned projects with relatively high CO2 emissions right off the block. You can start with Gorgon and Browse and keep on going," Voelte told The Australian newspaper, referring to projects by Chevron's (CVX.N) and Woodside respectively.

The Gorgon gas fields contain 40 trillion cubic feet of gas, some of it high in carbon dioxide. Chevron's Barrow Island project, a joint venture with ExxonMobil and Shell 180km to the southeast, aims to bury the CO2 in a saline aquifer. Prime Minister Kevin Rudd's Labor party has already begun seeking conservative opposition support for the emissions scheme, which will force 1,000 of Australia's biggest polluting companies to buy carbon emissions permits on its introduction.

Still in development, the regime will cover 75 percent of carbon emissions from the A$1 trillion economy and create one of the world's broadest trading schemes, including fuel and transport emissions, as well as agriculture from 2015.

Swan said he would speak to Woodside in a week to sort out whether it qualified for free permits promised to big export polluters, who face paying for only between 10-40 percent of total emissions in the scheme's first years.

Woodside shares had fallen by 4 percent at midday.

GOVERNMENT SEEKS SUPPORT

Australia's petroleum industry said the LNG industry was helping Asia address climate change by exporting a clean energy source -- slashing greenhouse gas output by 120 million tonnes -- and should not be punished through higher costs.

"The simple fact is that because of the massive capital costs of A$20 billion-plus per project, LNG projects do not earn a single dollar's profit for the first 7-10 years," Australian Petroleum Production and Exploration Association CEO Belinda Robinson said.

With conservative lawmakers opposed to government plans, Rudd needs seven extra votes in parliament's upper house, the Senate, including two independents and five Greens, who have already criticised the emissions regime for not being tough enough.

Voelte said the A$15 billion LNG export industry was unlikely to qualify for any free permits under the trading plan as they would go only to the biggest polluting energy companies exposed to cheaper overseas competitors.

Rival Origin Energy (ORG.AX), a utility with rich gas reserves, said the scheme's conception had been underway for some time, dismissing energy sector doom as posturing for assistance.

"If one believes in markets, then I suspect it's unlikely that there'd be blackouts or loss of generators from the system purely for the reason of the introduction of the scheme," Origin Chief Executive Grant King told local radio.

Woodside, Australia's second-largest oil and gas producer, reported on Thursday a 14 percent jump in second-quarter output, driven by Northwest Shelf and Stybarrow oil production off Western Australia. Sales leapt 52 percent from a year earlier.

Woodside, 34 percent owned by Royal Dutch Shell Plc (RDSa.L), is targeting 2008 output of 80-86 million barrels of oil equivalent, with production so far this year less than that. ($1 = A$1.02) (Editing by David Fogarty)