Renewed safety concerns regarding nuclear generation resulting from the massive Japanese earthquake may benefit the development of new liquefied natural gas projects (LNG) in Australia, according to an international ratings agency.

"Events in Japan have highlighted the risks of operating nuclear generation in seismically active areas," says Arnon Musiker, Director in Fitch's Energy & Utilities team. "Any potential switch away from nuclear power is likely to favour gas-fired generation, the most practical low carbon-emission alternative. Australia is well positioned to meet additional medium-term gas demand," Mr. Musiker said.

Public concern over nuclear power is now higher than it has been for a number of years. However, energy security, diversification of fuel mix and a reduction in carbon emissions have underpinned Japan's historical commitment to nuclear power and China and South Korea's significant nuclear expansion programmes. Whilst it is not currently possible to determine whether recent events will change north Asian governments' commitment to nuclear power, gas is the natural substitute fuel.

Australia has long-standing relationships with key Asian utilities and is regarded as a high-quality supplier. Australia is also not affected by the impending gas supply shortages experienced by other countries in the region which have traditionally supplied Asian LNG importers. In the last two years, north Asian utilities and gas companies have signed significant LNG supply contracts, underpinning the current wave of Australian LNG development, despite these projects facing inflationary cost pressures.

"Asian utilities will continue to sign long-term offtake contracts with Australian LNG projects with some also taking substantial minority equity stakes," says Mr Musiker.

Fitch's special report entitled "2011 Outlook: Asian Power and Utilities" published on 28 November 2010 provides an overview of ongoing demand growth for energy in various Asian markets, and intended generation investment plans to meet future demand.

Fitch's special report entitled "2011 Outlook: Australia Oil and Gas", published on 8 February 2011, explores the factors underlying Asian demand for Australian gas exports and the impact of labour shortages on LNG projects.

Meanwhile, the nuclear leak intensified debates on whether Australia should continue adopting nuclear power.

Ziggy Switkowski, chairman of the Australian Nuclear Science and Technology Organisation (ANSTO) until a few months ago, expected Australians would be fearful about adopting nuclear power after the unfolding crisis in Japan.

But despite the incident, he believed Australians would use the clean energy source eventually.

"I remain convinced that in our future we will see nuclear power. We do need clean energy, we are an energy hungry nation," he told ABC Television.

With Reuters

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