PERTH Australia's government should ensure the nation's booming liquefied natural gas industry not be charged a proposed carbon tax, or risk a switch to dirtier fossil fuels, Australian Petroleum Production & Exploration Association (APPEA) said on Thursday.
"We'll be looking for a design that sees the expansion of natural gas and that is the fundamental and common-sense test of success," APPEA's chief executive, Belinda Robinson, told Reuters.
"We will be looking for a no cost impact (to LNG) -- only as a transition measure, of course, until there is some sort of a global carbon price."
Australia announced plans last week for an interim carbon tax from July 2012, with a transition to a full emissions trading scheme three to five years later, to help the country cut emissions by five percent by 2020 from 2000 levels.
But the government has yet to agree on crucial details such as the actual starting price that big business and investors need. The deal would also need approval of both houses of parliament.
Australia's LNG industry, which has about $200 billion worth of projects on the drawing board, should be given permits for 100 percent of their carbon emissions, effectively exempting the industry from the tax due to its role in helping LNG-consuming nations reduce their carbon footprint, Robinson said.
"One hundred percent is the only way to ensure that there's not a cost impact... any cost impact is obviously going to mean that the expansion of natural gas is under threat," she said.
Australia aims to export more than 60 million metric tons of LNG by 2020, up from 16.7 million metric tons in 2009, to become the second-biggest supplier behind Qatar.
"In a climate change context one of the most significant things that Australia can do is to expand the LNG industry to enable other countries to use Australian natural gas as a substitute for some of their much higher greenhouse gas emitting energy alternatives," she said.
A carbon tax could stifle Australia's booming LNG industry, which could ultimately result in increased use of fossil fuels that emit more carbon, Robinson said.
Burning gas in power stations typically releases less than half the CO2 than coal-fired power plants. It also emits much fewer pollutants such as sulphur dioxide than coal.
But LNG's carbon emissions are heavily skewed toward its production-- the gas is liquefied by cooling it to -161 degrees Celsius, a process which requires enormous amounts of energy.
Proponents say lower carbon emissions at the end of its life-cycle make up for higher emissions during production.
Production and consumption, though, has surged over the past few years as the world's largest exporter Qatar has started up several huge production lines.
LNG producers would be particularly vulnerable to a carbon tax because they are entirely dependent on exporting their product and already have higher costs than most LNG projects globally with costs of between $6 and $8 per million British thermal units (mmBtu). Most non-Australian projects cost less than $6 per mmBtu, according to APPEA data.
"Our focus is very much on LNG. It's a growth industry and it's also where the impacts will be felt the greatest, given that it is a trade-exposed industry," Robinson said.
"You only liquefy gas so that you can load it on to tankers and send it somewhere, so it is by definition an export product and given the volumes we're talking about, it's a very exposed and very vulnerable industry," Robinson said.
Ultimately, APPEA would like to see a global framework for carbon pricing, a development which it believes would benefit gas projects.
"In a perfect world, you'd have an international price on carbon," Robinson said. "I don't think anyone is enormously optimistic, sadly, that that's going to be achieved anytime soon."
(Editing by David Fogarty)