Rick Wilkinson
OGJ Correspondent
PERTH, Apr. 21 -- An independent report produced by WorleyParsons Ltd. and released at the Australian Petroleum Production & Exploration Association (APPEA) conference in Perth noted the benefits of LNG in reducing greenhouse gas (GHG) emissions.
The report, entitled “Greenhouse Gas Emissions Study of Australian CSG to LNG,” compared the amount of GHG emissions associated with Chinese electric power generators using Australian LNG derived from coal-seam gas (CSG) with those using imported black coal. It found for every tonne of carbon dioxide emissions associated with CSG-LNG production, as much as 4.3 tonnes of emissions were avoided when the gas was used instead of imported coal.
A CSG-LNG project exporting 10 million tonnes/year of LNG to China could avoid more than 32 million tpy of global CO2 emissions. Over a 30-year life the project could avoid 968 million tonnes of CO2—a figure that is almost double Australia’s total annual greenhouse gas emissions.
APPEA Chief Executive Belinda Robinson said the study’s findings had profound implications for climate policy deliberations. She reiterated the call for Australian gas exporters not to be disadvantaged by a government policy on carbon emissions that is unmatched in competing countries. “The LNG industry has been treated as the problem,” she said. “It’s not. It is the solution.”
She said, “There is significantly more to be achieved by expanding Australia’s LNG industry than by any carbon pricing mechanism in place in Australia.”
At that same conference, Don Voelte, outgoing chief executive of Woodside Petroleum Ltd., told delegates the Australian government’s proposed carbon tax (to be introduced in July 2012) could be the breaking point in deferring or perhaps even cancelling some of the $130 billion (Aus.) gas projects pending in Australia.
Voelte warned Australia would be going it alone in its plans for a carbon tax and would penalize gas as a clean energy source and would push up domestic gas prices and the cost of living. Consequently it will hurt exports and manufacturing. At the moment there is $88 billion (Aus.) worth of LNG projects under construction in Australia and another $130 billion worth on the drawing board.
Industry opposes tax
Other gas industry leaders said a carbon tax in Australia will make local producers less competitive with other LNG suppliers such as Qatar and Malaysia that have no plans to tax emissions. They also pointed out the previous plan to provide LNG producers free carbon credits for 66% of their emissions is out of date. In addition, many of the country’s largest foreign investors have voiced concerns about Australia’s investment reputation. They want the carbon tax to be reconfigured for a fixed 3-year period and move to a flexible market price only under certain conditions.
The Labor government plans to introduce a fixed carbon tax July 1, 2012, before moving to a full emissions trading scheme within 3-5 years.
Australia’s Minister for Resources and Energy Martin Ferguson told the conference the LNG industry will receive greater protection from the proposed carbon tax if it can prove the compensation envisaged under the previous, now abandoned, emissions trading scheme is inadequate. However Ferguson rejected Voelte’s call for LNG to be excluded from the carbon tax.
Ferguson extended an olive branch, however, acknowledging the LNG industry has changed since the Carbon Pollution Reduction Scheme was finalized in November 2009. At that time the only operational LNG projects were the North West Shelf and Darwin, and it was on this two-project baseline that LNG companies were to get 66% of their pollution permits free under the CPRS, including a six-point recession buffer.
Ferguson said compensation for the LNG sector would now depend on where the baseline was set. He invited companies to supply appropriate material to his department in support of their case.
A contrarian view
Although natural gas is the fastest growing fossil fuel, it is unlikely to reduce emissions enough to reduce climate change, said Christof Ruhl, chief economist at BP. Ruhl told the conference that while the replacement of coal by gas would have some effect, it won’t be enough to stave off greenhouse emissions that can cause climate change. He said BP’s 2030 projections indicate CO2 emissions will continue to increase despite advancements in energy efficiency.
Moreover, he said, “The problem of energy security won’t subside—just shift,” with India and China relying on imports for up to 80% of their oil consumption. Although exponential growth is expected in the gas sector, Ruhl said, it’s not clear what part unconventional gas will play in the future.
He said the key to this uncertainty is China’s energy consumption and the composition in its energy mix. China has made progress in developing coal-seam gas but remains heavily reliant on coal.
File photo from PDVSA..
