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Educating Arnie about LNG safety

AUSTRALIA has offered to send technical experts to the US to convince the California administration of Arnold Schwarzwenegger that liquefied natural gas plants can be environmentally safe and secure.

The offer was made as US energy secretary Spencer Abraham told LNG industry officials in Melbourne that there was a market opportunity on the US west coast for Australian LNG, thanks to the special relationship between the countries.

But he warned the US wanted to diversify its fuel supply sources and Australia would face competition in securing long-term contracts.

The US has four import terminals, but they are all on the east coast where the extra freight cost makes Australian supplies uncompetitive.

Proposals for terminals on the west coast are causing environmental and safety concerns in states such as California.

BHP Billiton, a partner in the North West Shelf LNG project, is proposing to build a terminal offshore of California in a bid to allay concerns.

Woodside's acting CEO, Keith Spence, said the west coast market would not be a core business for the NW Shelf but the venturers would look at US sales on top of their commitments in Asia.

But he said the US west coast could be a foundation market for the $5 billion Greater Sunrise project in the Timor Sea, which was actively pursuing sales in the US and the Asia Pacific market.

Woodside and its Greater Sunrise partners, ConocoPhillips, Shell and Osaka Gas, are close to a decision on whether to locate LNG processing offshore or bring the gas onshore to Darwin.

Mr Spence said Mr Abraham had made a compelling case for Australia to become a supplier to the west coast once environmental issues had been overcome.

Both Shell and ChevronTexaco, which operates the Gorgon project of Western Australia, have opened negotiations to sell LNG from huge Gorgon reservoirs to their parents' US marketing operations.

After the Melbourne meeting, Federal Resources Minister Ian Macfarlane said the environmental issue was crucial to Australia's LNG prospects in the US.

He said it could be overcome once the US was educated about the safety of LNG.

"We are ready to provide all the assistance necessary at a government, departmental and company level to reassure the US that our experience with LNG demonstrates it is secure and environmentally safe fuel source," he said.

Mr Macfarlane suggested that if long-term supply contracts were arranged, Australian LNG could be supplied to the US west coast from around 2009.

Safety is a particular concern after the September 11 terrorist attacks, but Mr Abraham said a recent review of the Boston terminal had proved "very positive".

"Everyone involved appreciates the security issue."

Mr Abraham said the US has chosen natural gas as its primary source of future power generation, but lacks sufficient domestic resources.

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