Isra-Mart srl : Emission reductions at risk if Australia LNG charged carbon tax- APPEA

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Global emissions reductions could suffer if Australian liquefied natural gas (LNG) producers are charged a proposed carbon price, the Australian Petroleum Production & Exploration Association (APPEA) said on Sunday, citing an industry report.

The APPEA-commissioned report by WorleyParsons found that coal seam gas projects could help cut Chinese emissions. For every tonne of carbon dioxide from coal seam gas to LNG production and use, Chinese power generators could cut up to 4.3 tonnes of emissions, it said.

A coal seam gas to LNG project exporting 10 million tonne per annum (mtpa) to China could cut emissions in that country by 32 million tonnes per year, the report said.

Australia is in the midst of an LNG boom, partly due to rising fuel demand from Asian nations such as China and India. About A$88 billion ($92 billion) worth of LNG projects are under construction now, and another worth A$130 billion are under consideration, according to APPEA.

"If a cost is imposed on Australia's LNG industry, global emissions will increase as a consequence of there being less natural gas available to replace more greenhouse-intensive fuels," APPEA's chief executive, Belinda Robinson, told reporters at an industry conference in Perth.

"There is no point in constraining the very industry that is the key to assisting the world move to a cleaner energy burning future," Robinson said.

Australia is in the midst of an LNG boom, with A$88 ($92.136) billion worth of LNG projects in construction, and another A$130 billion worth under consideration, according to APPEA.

Among those under construction are two coal seam gas to LNG export projects in the eastern state of Queensland - Santos' Gladstone LNG and BG Group's Queensland Curtis LNG.

Australia's government plans to introduce a fixed price on carbon pollution from mid 2012 ahead of a full emissions trading scheme three to five years later, as part of its efforts to fight climate change.

The actual carbon price has yet to be finalized, but Australia's top climate adviser suggested the carbon price should be set at between A$20 and A$30. [ID:nL3E7EH03L]

Although LNG is a cleaner-burning fuel for its end-user, the the production process involves an energy and emissions intensive process of cooling the gas to -164 degrees Celsius for transport.

Coal seam gas projects in Australia's eastern state of Queensland may produce more even greenhouse gas due to the amount of energy required to extract the gas from drilling and water pumping to extract the gas, according to experts.

Robinson said Australian LNG projects are already burdened with "extraordinary" high costs and should not be forced to pay the carbon price before a global price is set.

"Australia is one of the most expensive if not the most expensive destination for LNG projects in the world... The economics of LNG projects are very, very fragile," Robinson said, but added it was currently not clear exactly how LNG projects will be affected.

"It's very difficult to say where and how the price impact would fall," Robinson said.

Without a carbon price, industry analysts have not yet been able to determine the exact cost of the tax on LNG projects, but many analysts have said the long-anticipated carbon price is unlikely to be a dealbreaker for most LNG projects.