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Emissions scheme adds to LNG costs, Shell says

Sydney Morning Herald

Emissions scheme adds to LNG costs, Shell says

  • ENERGY Jamie Freed
  • Saturday July 19, 2008 – 9:27PM
ROYAL Dutch Shell has joined Woodside Petroleum’s call for the Federal Government to consult further with liquefied natural gas producers about the effects of the emissions trading scheme outlined in its green paper.

Shell’s executive director of gas and power, Linda Cook, yesterday noted none of the other countries in which it produced LNG had an emissions trading scheme or carbon tax that could affect the project’s economics.

“We have five projects in operation around the world, including one here in Australia [the North-West Shelf],” she said in Sydney. “The others are in Brunei, Malaysia, Oman and Nigeria.”

Ms Cook, who is based in The Hague, said Australia was an attractive place to develop LNG because of its large resource base and its proximity to large markets in Asia.

Shell owns 34 per cent of Woodside and has stakes in several potential LNG projects in Australia including Gorgon, Wheatstone, Browse, Sunrise, Prelude and a Gladstone project.

But the chairman of Shell Australia, Russell Caplan, noted that LNG producers and refiners did not emit enough carbon to be handed free permits by the Government under the standards put forward in the green paper released this week.

He said both were emissions-intensive, trade-exposed industries that should be offered some protection. “Any cost that is imposed on our Australian projects and not imposed on projects outside Australia makes it that much harder for Australian projects to compete globally,” Mr Caplan said.

“It seems to us that all the gas you can get to market assists with the climate change story, because gas is the cleanest of all the hydrocarbon fuels, and you ought to want to get more gas to market.

Ms Cook would not reveal whether she planned to meet with the Government during her visit to Australia. She said Shell supported the green paper because it was a consultative process which would consider input from industry, unlike the Government’s surprise decision to cancel an exemption to an excise tax on condensate production as part of the federal budget.

“We’ve made that disappointment clear to the Government,” she said. “I think it was a bit out of character for the Australian Government because there is a track record here of engaging with industry, and hopefully that will continue in the future.”

Ms Cook would not reveal which Australian LNG project Shell expected to develop first. “They all have their unique advantages and challenges and we’re working well with all partners and all projects to try to move them along,” she said.

Following the recent purchase of a portion of Arrow Energy’s Queensland coal-seam gas tenements, Ms Cook said her company was interested in further opportunities in that growing sector. But she would not reveal whether Shell was in talks with Origin Energy, which is seeking to sell a portion of its interests.

Ms Cook said Shell had no plans to divest its stake in Woodside, but would not be drawn on whether it wanted to increase that position following a blocked takeover attempt in 2001.

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