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North America hungry for LNG.

AUSTRALIA must develop its gas reserves to be ready to supply North America's huge and growing liquefied natural gas (LNG) markets, federal industry minister Ian Macfarlane said yesterday. But a report prepared for the federal and West Australian governments warns foreign appetite for Australian gas could threaten local industries.

The federal government is pushing for Australia to be a major supplier of LNG to Mexico and the west coast of the US.

California is facing dwindling reserves of LNG from traditional suppliers in North America and Mexico is experiencing energy growth demand of about eight per cent a year.

"The pressure is back on Australia to have a gas field that can supply into this market," Macfarlane told reporters in Los Angeles."The potential is there for 20 to 25 year contracts worth $A50 billion."

On the Mexican leg of his North American visit Macfarlane toured the sites of two proposed LNG receiving terminals in Baja California, Mexico. Developing the offshore West Australian Gorgon gas project was vital, according to Macfarlane. The Gorgon partners are ExxonMobil, Shell and ChevronTexaco. ChevronTexaco won approval earlier this month to build a gas import terminal off Mexico.

"The message today from ChevronTexaco is they need Gorgon to proceed this current year so they can get on with their terminal construction," Macfarlane said.

"The demand for gas is there. There is also the potential that gas [processed at ChevronTexaco's Mexican facility] will come north into California."

But back in Australia, a study prepared for the federal and West Australian governments, has warned that overseas demand for West Australian gas could threaten up to $660 billion worth of minerals projects in that state, according to a report in today's Australian. The mineral-processing sector - including alumina and mineral sands industries - in Western Australia's south-west needs competitive energy prices to encourage new developments and expansion of existing projects, the newspaper reports.

But a study by Sydney-based Sleeman Consulting has said gas from existing North West Shelf project reserves will be fully committed if existing Japanese LNG customers roll over their contracts beyond 2009. These reserves currently supply most of the state's domestic gas market and the report said the Gorgon project would probably be unable to justify domestic gas supply in its initial investment phase unless demand sufficient to cater for a greenfields aluminium smelter was developed.

The federal and WA governments should work with industry stakeholders to encourage development of gas reserves and ensure enough gas was available to meet the domestic market's present and future domestic market requirements should be encouraged, the report said.


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