Speaking at the World Energy Congress in Sydney Macfarlane said an MOU was scheduled to be signed that would act as a fallback if California’s environmental authorities block the construction of any LNG terminals in the state.

Currently a number of Australian projects are targeting sales contracts in southern California including the controversial Gorgon Gas development which has signed letters of intent covering 20-year supply contracts to the US west coast.

Shell, Sempra and Marathon Oil have all proposed LNG terminals in Baja California while BHP got the backing of Prime Minister John Howard for its $US500 million floating LNG receiving terminal, to sit 40km off the US west coast.

Macfarlane said the Californian market could potentially take up to seven million tonnes of Australian LNG per year, doubling the size of the country’s largest export deal, the NWS shelf LNG supply to China.

The minister added that importing LNG through Mexican terminals would circumvent Californian opposition to the terminals and would ease security of supply fears that the US government has about pipelines from its southern neighbour.

The MOU with the Mexican Government covers the supply of coal, natural gas and technical information as well as laying the foundation for Baja to used as a North American terminal for Australian LNG.