THE world’s largest producer of liquefied natural gas has called on the federal Government to extend to the Australian LNG industry protection from carbon price hikes offered to the steel, aluminium and cement industries under its new emissions trading scheme.

Shell Australia chairman Russell Caplan and the company’s global head of gas power Linda Cook said yesterday they would continue to work with the federal Government to ensure the interests of the emissions-intensive, trade-exposed (EITE) sector were catered for in the carbon trading regime.

LNG does not qualify as an emissions-intensive, trade-exposed industry and so will not be eligible for free carbon permits offered to other industries that are unable to pass on the price rises from the new trading regime because they trade in international markets against competitors unfettered by CO2 reduction regimes.

Mr Caplan said yesterday he had “no idea” why the federal Government had not included LNG in the suite of emissions-intensive, trade-exposed industries such as steel, aluminium and cement which will be given free permits under the new emissions trading scheme.

“LNG is emissions intensive and it is trade exposed, so the question of how that is dealt with is one that is alive,” he said.

“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.

“All the gas that you can get to market assists with the climate change story because gas is the cleanest of all the hydrocarbon fuels — you ought to want to get more gas projects off the ground.”

Ms Cook, who was in Australia this week, said the industry had also been surprised and disappointed by the federal Government’s decision in the May budget to scrap the excise exemption on condensate from the North West Shelf Venture, in which Shell has an interest.

“It did take us by surprise. What we were somewhat disappointed about was the lack of engagement prior to the announcement of the change to the structure of the North West Shelf project,” she said.

“We made that disappointment clear to the Government.

“It was a little bit out of character for the Australian Government — there is a track record here of engaging with the industry and we are very hopeful that will continue into the future.”

Ms Cook said the carbon trading green paper gave the industry an opportunity to engage with the Government on the treatment of LNG, and was “just the opposite” to the process used by the Government in the condensate matter.

“I do not think they are related — the green paper is a very constructive way forward,” she said.

“The green paper is the point in the process now that allows us to begin engaging on the Government’s early thinking in this area.

“The devil is always in the details and these are complicated structures, they have lots of implications, sometimes unintended.”

Don Voelte, chief executive of Woodside, in which Shell has a 34 per cent stake, said this week the company’s Browse LNG development was under threat from the new carbon trading scheme’s lack of protection.

Ms Cook said it was “too early to tell” what impact the scheme would have on Shell’s Prelude project, a 3.5 million tonnes a year floating LNG plant to process gas from the Prelude field, about 450km northeast of Broome.

“For Prelude, the one thing that is good for us is that we are in the early stage of concept selection for that project, so at least now we are starting to get some clear idea around what the implication of any legislation may be on that development, so we can factor that in from the beginning,” she said.

http://www.theaustralian.news.com.au/story/0,25197,24042050-643,00.html