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Gas clash leaves local industry fuming -

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ELEANOR HALL: There's plenty of the resource in the ground but Queensland's natural gas industry is
complaining that its development is being stymied by the state government.

The Queensland Government has proposed quarantining up to one fifth of the $40 billion resource for
Australian consumption.

But the industry is warning that such restrictions could scare off investors.

Annie Guest reports from Brisbane.

ANNIE GUEST: When Western Australia's extensive North West Shelf Joint Venture was developed - one
of the biggest projects in Australia's history - 15 per cent of the gas was quarantined for
domestic sales.

Enormous tankers waiting at the port in the Pilbara are loaded up, while a pipeline also carries
gas hundreds of kilometres to the south for eventual commercial and domestic use.

In Queensland, the Natural Resources Minister Stephen Robertson says up to 20 per cent of future
coal seam gas produced in his state could be reserved for local sales.

STEPHEN ROBERTSON: Any responsible government would want to ensure that during the development of
the new industry that it is focussed on exporting one of our most important energy resources, that
we reserve sufficient gas for our own domestic needs.

ANNIE GUEST: The Federal Government is reported to be concerned that the state government's
proposal to quarantine up to one-fifth of the $40 billion worth of coal seam gas for local sales
could deter foreign investors.

The Federal Minister Martin Ferguson is overseas and unavailable for an interview. A spokesman has
denied the reports, saying there's plenty of evidence Australia is one of the best places to invest
in gas.

Meanwhile, the Queensland Minister Stephen Robertson says the proposal is only one of several in a
discussion paper released to the industry.

STEPHEN ROBERTSON: In fact the wording in the discussion paper actually says between 10 and 20 so
it would be misinterpretation for anyone, whether it be the Federal Government or anyone else, to
say that we are looking for a reserve of 20 per cent.

ANNIE GUEST: But the industry is strongly opposed to any suggestion of some gas being quarantined
for local use.

The peak body representing gas producers is the Australian Petroleum Production and Exploration
Association.

Its chief executive, Belinda Robinson, says such restrictions deter investors.

BELINDA ROBINSON: And so for just all the same reasons for example that you don't have domestic
reservation for coal or bauxite or iron ore but we have both a domestic industry and export
industry. Those same sorts of marketing parities apply to natural gas as well.

ANNIE GUEST: So rather than quarantining an amount of the production for domestic sales, your
argument is that the market should control that and, for instance, the producer sells to the
highest bidder?

BELINDA ROBINSON: Well, doesn't quite work like that but yes, we are essentially saying that there
is a very good efficiently operating domestic market. Let's let that market do its job.

ANNIE GUEST: But yet in Western Australia at the North-West Shelf Joint Venture, 15 per cent of
that production in reserved for domestic sales. Would you argue that that's hampered contracts and
the market in that industry?

BELINDA ROBINSON: Yes we would.

ANNIE GUEST: But this is a project that has expanded by what, almost 50 per cent or expanding by
almost 50 per cent at the moment, and there are huge contracts for forward sales of LNG.

BELINDA ROBINSON: Yeah, no what I am saying is though that it is acting as a disincentive for other
players so those companies wanting to enter into the Western Australia market.

ANNIE GUEST: What does it mean for the price paid by the consumer?

BELINDA ROBINSON: The work that is being done by the Queensland Government which they have outlined
in their discussion paper shows that the reservation policy will make next to no difference to the
long term price of gas.

ELEANOR HALL: Belinda Robinson is the chief executive of the Australian Petroleum Production and
Exploration Association. She was speaking to Annie Guest in Brisbane.