Wednesday, 20 April 2011

Gas firms 'don't need help on carbon tax

12 April 2011, Page: 6

A CALL for liquefied natural gas to be exempted from a carbon tax has been undermined by evidence the industry would boom over the next decade even if it received no compensation, analysts say. Don Voelte, chief executive of LNG company Woodside Petroleum, said his industry should be excluded from a carbon price, in part because gas has lower greenhouse gas emissions than coal. Mr Voelte said Australia was "going it alone" on climate change and warned a carbon tax could lead to the delay or cancellation of some of the $170 billion worth of gas projects being built or considered.

Analysts said it was wrong to say Australia was going it alone in imposing a carbon price. The European Union, New Zealand and some US states have emissions trading systems, with California to follow next year. Mr Voelte's claims are at odds with an analysis by think tank the Grattan Institute, which found that proposed gas projects would reap large profits with or without a carbon price. The detailed institute study released last year found a carbon tax was highly unlikely to affect gas investment as it would increase total project costs by only a fraction.

The institute found there was no environmental justification for paying LNG projects any compensation as there was no evidence a carbon price would lead to their moving offshore. A recent analysis by J.P. Morgan suggested Woodside Petroleum's profit in 2013 would be reduced by little more than 2%, assuming a carbon price of $25 a tonne and compensation equivalent to that under Labor's shelved emissions trading scheme.

Grattan Institute chief executive John Daley said its analysis found all proposed projects would remain highly profitable, assuming surging gas prices held up. "A carbon price does not appear to threaten the viability of any of the projects that are proposed", he said. "One of the reasons demand for gas is going up is concern about carbon. For the gas industry to take the benefit of that increased demand and at the same time ask to be protected from the carbon price seems to me to be taking one side of the coin and not the other".

Climate Institute deputy chief executive Erwin Jackson said LNG would be better placed to respond to a carbon price than some other fossil fuel industries. He said a carbon price of $30 per tonne emitted would make it profitable for LNG companies to invest in technology to capture and store gas underground. "They're just being bullies to try to get a better deal", he said.

Under the 2008 emissions trading proposal LNG firms were not going to be compensated. Revisions led to the industry being offered two thirds of carbon permits free, plus $610 million in direct compensation. Resources Minister Martin Ferguson left the door open to a compromise on LNG, saying the government would consider its rapid growth and industry changes when deciding compensation.

Speaking at a petroleum industry conference in Perth, Mr Voelte responded that "the stoush has just begun" with the government. Climate Change Minister Greg Combet said the government would support the industries most affected under a carbon price, but the biggest polluters must play their part.