LNG projects using gas with high carbon dioxide content would not be viable under the proposed emissions trading system, Voelte told The Australian in a report published this morning.
"This emissions trading scheme will knock planned projects with relatively high CO2 emissions right off the block," Voelte told the newspaper.
"You can start with Gorgon and [Woodside's] Browse [project] and keep on going."
The Australian reported this as threatening more than $60 billion in LNG investments, or more than $30 billion each for Gorgon and Browse.
But as Voelte said, "...start with Gorgon and Browse and keep on going". Inpex's Ichthys LNG project will also using high-CO2 gas. A second train at Darwin LNG is also likely to be using such gas. So we could be talking about $120 billion or more in investments.
The Australian LNG export industry was unlikely to qualify for free permits for trade-exposed industries under the emissions trading plan's compensation formula, in part because the industry had already taken big steps to reduce emissions, according to Voelte.
"We will fall just below the cut-off, which will mean all the worst emitters will be given a free ride, and clean fuels like LNG will have to bear the whole burden," he said.
He said this outcome meant relatively clean LNG exports would at a disadvantage when compared with much dirtier coal exports.
Voelte's assessment that the LNG industry will not qualify for permits under the proposed formula is supported by analysis from Deutsche Bank experts and the Australian Petroleum Production and Exploration Association.
"Any carbon impost that is not shared by our competitors will only worsen Australia's reputation as the highest cost LNG investment destination servicing the Asia-Pacific and further frustrate the capacity of Australia's LNG producers to commercialise Australia's gas reserves," APPEA chief executive Belinda Robinson said. "The price of not getting this right is Australia's LNG future."
According to APPEA, tripling Australia's LNG exports to 60 million tonnes over the next 10 years would result in 120 million tonnes greenhouse gas pollution being avoided in the Asia-Pacific region.
"In large part LNG is Australia's economic, and Asia's environmental, future," Robinson said. "This is what is at stake and what will be forgone unless the Government understands and addresses the full impact of its proposals to protect Australia's competitiveness."
APPEA said it is preparing a response to the Government, while Woodside made it clear it is planning to lobby strongly for changes to the proposed scheme.
But not all proposed LNG developments will be badly affected by the emissions trading plan.
Woodside's Pluto development, Chevron's Wheatstone and the various Queensland coal seam methane LNG projects will all be using gas with low to negligible CO2 content.
The Rudd Government may prefer to see these projects developed first and high-CO2 schemes put on hold until carbon sequestration is better understood.
The Labor Government is seeking opposition Liberal Party support to pass the laws through the Australian Senate next year as it has given up on gaining the support of the Greens, the newspaper said, citing unnamed ALP sources.
