Federal resources minister Ian Macfarlane has claimed that two major gas projects planned for Western Australia will be scrapped if the state government forces producers to reserve a portion of their output for the domestic market.
Federal resources minister Ian Macfarlane has claimed that two major gas projects planned for Western Australia will be scrapped if the state government forces producers to reserve a portion of their output for the domestic market.
Mr Macfarlane used the opening of the Asia Pacific Economic Cooperation Gas Forum in Perth today to vigorously attack the state government plan, which he said would create sovereign risk and have "real and tragic" consequences.
Mr Carpenter responded in kind, telling international delegates that he was simply continuing the policy put in place by former Liberal premier Sir Charles Court.
"Don't be misled, there is no change of policy, there is no sovereign risk," Mr Carpenter said.
The controversy over gas policy was triggered by a state government discussion paper released earlier this year, which proposed that up to 20 per cent of gas from new projects should be reserved for the domestic market.
It follows a long-standing agreement that requires a portion of North West Shelf gas to be sold in the domestic market.
The debate comes at a time when several big gas projects, including Chevron's Gorgon project, Woodside's Pluto and Browse projects, BHP Billiton's Pilbara LNG project and Inpex's Ichthys project, are on the drawing boards.
The developers are keen to secure high-priced export sales and are concerned about selling in the local market at a lower price.
Mr Carpenter said the policy was designed to ensure security of supply for Western Australia, adding that the policy would be applied flexibly and that producers and consumers would actually set the domestic gas price.
He emphasised that his government would continue to support the booming resources sector.
"WA governments since Sir Charles Court have made that happen with policy settings that we are now being criticised for."
Mr Carpenter also rejected the threat posed to sovereign risk.
"Developers know the ground rules at the start, there is no sovereign risk. Sovereign risk is when the rules change later."
Mr Macfarlane was unimpressed with these arguments, insisting there was "no historical precedent" for the proposed policy.
In particular, he said the NW Shelf comparison was not valid because Sir Charles Court's government signed a take-or-pay contract with the NW Shelf venture, underpinning the viability of the project.
He said two companies, which he declined to name, had told him that major offshore projects would not proceed if the policy was enforced.
"They have the option of going elsewhere and they will if the policy is implemented, especially at the 20 per cent level."
Mr Macfarlane added that the policy would put a "giant shadow of uncertainty" over Australia's ability to supply international markets, providing a boost for competing LNG producers.
