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Speech by the Hon Ian Macfarlane MP: Mayflower Hotel, Washington, USA: 18 December 2003: LNG Summit.

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The Hon Ian Macfarlane MP Minister for Industry, Tourism and Resources Media Release - 18 December 2003

Speech notes for LNG Summit Mayflower Hotel, Washington, USA, 18 December 2003

Thank you.

Gas is a vital resource at this time of year in Australia. Back home the temperature is also 30 degrees - Celsius - that’s about 90 - Fahrenheit. And our big use of gas this time of year is when families and friends gather round the BBQ. As an Australian Tourism Minister - as well as Industry and Resources - I’m allowed to throw in the names of a few beaches you should all jot down - like Mooloolaba and Cottesloe, the Gold Coast, Noosa, and Byron Bay. However it’s a pleasant change to be here so close to a white Christmas - thank you for the invitation to what, I’m sure, is the pinnacle gas gathering of the year.

The Australian Advantage Australia has around 200 TCF of natural gas of which we use only about 1 TCF a year. But before I start the sales pitch - I’d like to put you in the picture on the Australian economy. We’re not here to brag but Australia has weathered recent global downturns unlike any other OECD country, the most resilient economy in the world. We have maintained an economic growth rate of at least 3.5% for the last 5 years. Next year that is expected to nudge 4%.

Inflation has been captured in the ideal 2-3% margin. Foreign direct investment took a 17% dive in OECD countries this year, but we recorded a quadrupling of FDI into Australia. It’s worth noting that FDI by the US in Australia currently stands at $242B and to show what a close reciprocal relationship we have with the USA, Australian investment here currently stands at $194B. The Treasurer has just announced he is anticipating a budget cash surplus of A$5 billion in 03-04. And like yours, our Treasurer knows exactly where his pennies are.

But I want to point out that another plank to that economic platform is a consistent “hands-off” approach by our Government to business. We see it as our job to give industry the foundation - of low interest rates, consumer confidence, known fiscal arrangements, a secure regulatory environment and a skilled workforce - to simply let business get on with business. As Industry and Resources Minister I favour a broadly supportive government role for our resources sector. I am interested in ‘freeing’ the sector - to allow it to maximise the vast potential of our land.

As a Government we are not interested in telling resource developers how or where to do their jobs - but we will provide the best economic environment possible for them to excel. We do not ask for a share of the project, only a share of the profits through an almost

benevolent-after-profit excise regime. Furthermore, encouragement for the sector comes through pursuing foreign investment by offering pre commercial geoscience, broad financial incentives, support, assurances of sovereignty and exclusive commercial control by companies of their projects.

Nor is the Australian Government is interested in standing in the way of business with over-regulation and compulsory red-tape. But we do place great emphasis on providing regulatory certainty and transparency of government process.

Australian Gas Reserves Ladies and Gentlemen, Australia is resource rich and has very large proven reserves of natural gas. Yet many regions remain under-developed and exploration continues to turn up

major finds. Earlier this year ExxonMobil announced the discovery of the 20 TCF Jansz field and Inpex uncovered about 10 TCF in the Browse region, areas originally explored decades ago.

Australia is the world’s fifth largest exporter of LNG and we have the reserves to expand that significantly. New capacity that’s now under construction will see our LNG exports double over the next four years. A fourth train will be completed on the North West Shelf in the first half of next year and exports from there will rise to 12 million tonnes. Most of

that production presently goes to Japan, who we’ve been supplying since 1989. It’s worth noting that Australia has delivered over 1,500 shipments of LNG to Japan since 1989 - without missing a beat.

Last year of course China extended the world of LNG consumers announcing that it had selected the North West Shelf to supply 3.3 million tonnes of LNG to Guangdong Province. This A$25 billion 25-year contract is, to date, the biggest-ever trade deal for Australia. And there’s already talk of the contract doubling to at least 7 million tonnes per annum. It’s a relationship that enhances our reputation as a reliable, competitive and secure supplier of LNG.

Other developments include a new deal to supply Korea over a 7 year period. While the new Bayu-Undan field in Northern Australia’s Timor Sea is due to come on line in 2006 with ConocoPhillips and Santos supplying 3 million tonnes per annum LNG to Japan. Greenfields LNG projects presently being considered include ChevronTexaco’s Gorgon project; Woodside’s Sunrise and Browse projects; and ExxonMobil / BHP Billiton’s Scarborough development. These sites alone have proven reserves of 80TCF.

Gorgon is currently well advanced and could produce its first LNG in 2008. A letter of intent to supply up to 100 million tonnes of LNG to China over 25 years was signed this year. The huge Gorgon and Sunrise fields have schedules that could readily match the LNG needs of the US. And I know the proponents have their binoculars squarely focussed on the North American West Coast. By 2008 we aim to be an obvious choice for West Coast supply - for economic and security reasons. At the same time, BHP Billiton has applied for the first offshore LNG terminal off the southern Californian coast. If successful, the

company could supply the LNG import terminal from the Scarborough gas field. If nothing else I hope this trip will give me the opportunity to open a few more American eyes to the potential of Australian LNG. We have the quantity of reserves, the proven reliability of supply and competitive shipping costs. And - above everything else - a strong

industry and government partnership that will not rest until our LNG potential is realised and the American market benefits from that.

Australia already values the strong relationship developed with other countries we do business with - to that end, we remain on track to supply up to 30% of Asia’s demand for LNG by 2020.

Conclusion In conclusion, can I point to the already strong US-Australia business relationship. This is built on binding cultural, economic and strategic ties - we remain one of the US’s closest allies. Our Australian delegation would like to suggest an extension of that relationship - specifically within the LNG industry. It will take a decisive international industry partnership to overcome the environment and social challenges you face in the development of new import terminals. We would like to work cooperatively with the US Government and companies in meeting the challenges facing the industry in growing the US LNG trade.

Issues like: gaining consumer confidence with LNG; interacting with relevant state legislatures; and establishing sustainable US pricing structures. The Australian LNG industry has proven itself one of the most socially and environmentally responsible in the world. Our gas comes from some of the most environmentally precious locations in the world. And we have an industry that now successfully marries industry development with local wildlife protection.

To the extent that a very rare breed of wallaby - that’s a small kangaroo - is protected through the work of ChevronTexaco on Barrow Island near Gorgon, off the Western Australian coast. Australia is a special and unique land for many reasons. As a result we have learned to create mutually beneficial environments for those two apparent opposites - nature and progress.

In short, we have one of the world’s best-developed LNG industries that is in the game for the long-haul, not short-term gain. We are here to offer a long term LNG supply contracts of 25 to 50 years. We have a proven industry that guarantees reliable and long-term supply,

the latest in LNG technology and a sensitive approach to the development of this vital energy industry. If you want to see how true this is, perhaps you need to come sit on an Australian beach to see the facts more clearly. The beach names again are Mooloolabah, Cottesloe, the Gold Coast, Noosa, and Byron Bay.

Thank you.