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LNG Export Debate Ongoing in Australia

U.S. Department of Energy (DOE) staffers planning to go Down Under over the holidays to escape talk of liquefied natural gas (LNG) exports and their market impacts might want to reconsider. LNG and gas markets are a source of controversy in Australia, too.

Australia's National Institute of Economic and Industry Research (NIEIR) recently issued a report (prepared for The Australian Industry Group and the Plastics and Chemicals Industries Association) that predicted LNG exports from eastern Australia would curtail domestic gas supplies and drive up prices for gas and electricity. The NIEIR report urged that the country's gas export policies be reviewed.

"Many major projects to export liquefied natural gas from eastern Australia have been approved and will start to operate over the next several years," the NIEIR report said. "This will significantly impact the domestic supply of natural gas...[W]e do not argue against the export of LNG but emphasize that the benefits from exporting LNG should be weighed against the benefits of ensuring competitive supply to the domestic gas-dependent manufacturing sector."

If that sounds familiar to U.S. ears, it should. The United States should be exporting more chemicals, glass, steel, aluminum and other products, but the country's leaders should think long and hard before adding liquefied domestic natural gas to that list, a Dow Chemical executive said recently (see NGI, Aug. 27).

However, Australia's gas producers take a different view. "Australia's LNG sector is currently investing A$175 billion in new projects, and the sector created more than 100,000 Australian jobs this year," said the Australian Petroleum Production and Exploration Association (APPEA). "The Australians employed and businesses that have benefited from the growth of the LNG industry would seem to tell a different story to the picture of gloom portrayed in the report commissioned by representatives of the big gas buyers."

What large gas consumers call "competitive prices" APPEA said are really "price subsidies" that "are little more than protectionism dressed up as industry policy. Rather than supporting the subsidies requested, governments that desire expanded gas supplies should support the development of new gas projects to increase availability of natural gas and diversity of supply.

"Geoscience Australia says Australia possesses 819 Tcf of natural gas. One Tcf is enough gas to power a city of one million people for 20 years. In 2009-2010, the entire Australian economy consumed only 0.9 Tcf, with a further 0.9 Tcf exported. Gas reservation policies actually impair local gas supply and affordability -- not improve it -- because having laws dictate where and how gas can be sold invariably deters investment."

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