Macquarie Private Wealth released the research into the effects a carbon plan could have on the LNG sector in Australia yesterday.
It found evidence that LNG-related emissions would rise dramatically, projected to drive emissions growth of around 9% from 2009 to 2020.
Fugitive emissions from oil and gas projects and direct fuel combustion emissions from LNG projects would account for almost half of all growth in Australia's total emissions from 2010 to 2020.
However, the bank said LNG project economics would prove resilient in the face of the proposed carbon tax.
Under a $35 per tonne carbon price and 60% emissions-intensive trade-exposed assistance, LNG internal rates of return would fall by less than half a percentage point.
Despite all the uncertainty about what form a carbon tax would take, Macquarie found that operators were looking at the long-term picture regarding carbon policy.
It gave the example of Chevron's investment in a $2 billion carbon capture and storage facility at its Gorgon project, saying the level of investment pointed to operators believing that a carbon price would be an inevitable part of the future.
Given a $35/t carbon price with no EITE assistance, Gorgon would take around 15 years to recover its $2 billion CCS investment capital.
This and other industry examples have led Macquarie to believe that the proposed legislation would lower project internal rates of return by less than 0.5%.
Although that figure is manageable, it leaves less margin for error to absorb the increasingly likely construction cost pressures associated with the projects.
The bank sees Woodside and Santos as the most exposed, given the proportion of their net asset value derived from LNG projects.