Michael Richardson: Security vital in billion-dollar trade

Australia, like New Zealand, has set a high priority on expanding trade and investment ties with China, potentially the world's biggest market for Australasian resources and farm products.

Australia's drive to sell more to China will take a big step forward when Prime Minister John Howard arrives there tomorrow for a meeting in Shenzhen with Chinese Premier Wen Jiabao.

They will attend a ceremony to mark the opening of a liquefied natural gas terminal in the industrial hub of southern China that will receive LNG from Australia worth about A$25 billion ($30 billion) over the next 25 years.

Given the value of this new energy supply route to China and its vulnerability to terrorist attack, Australia has been quietly helping the Philippines improve its ability to respond to threats against ships and seaborne trade.

Military, police and intelligence officials from the two countries first met in Manila a year ago to exchange information, consider how law enforcement agencies can best co-ordinate their responses, and develop ways to strengthen security in the waters around the Philippines - which straddles vital sea lanes used by Australia to trade with Asia and the United States.

Since then, Australia has extended its counter-terrorism co-operation on land with Indonesia and, more recently, the Philippines to encompass maritime security with Manila.

A number of recent developments have evidently prompted Canberra to pay closer attention to the possibility of an attack launched by al Qaeda-linked terrorists in the southern Philippines against ships carrying billions of dollars of Australian exports to Asia and the US - particularly giant tankers laden with LNG going to Japan, South Korea, Taiwan and soon to the West Coast of North America as well as China.

Because it is an island-continent separated by the sea from its main markets, Australia is, by some counts, the fifth biggest user of shipping in the world.

Almost all Australia's overseas trade by bulk and about 72 per cent by value is carried in ships. A large majority of exports of Australian goods to six of its top 10 markets - Japan, China, the US, South Korea, Taiwan and Hong Kong - are carried north in tankers, bulk carriers and other vessels through two deepwater passages in Indonesia: the Lombok Strait between the islands of Bali and Lombok, and the Makassar Strait between Borneo and Sulawesi.

Then, depending on their destination, size and weight, the ships either branch right through the Celebes Sea south of Mindanao, the main island in the southern Philippines, out into the Philippine Sea and the Pacific Ocean; or they branch left, skirting the Sulu archipelago and Palawan Island in the Philippines to reach the South China Sea.

The Philippine Government sought help from the Australian Federal Police (AFP) after a sea-going ferry with almost 900 passengers caught fire and sank after leaving Manila for the south in February 2004. A total of 116 people were killed or are still missing, presumed dead.

Australian forensic investigators and explosive specialists found that the fire was caused by a bomb in the engine room.

Six members of the Abu Sayyaf and an affiliated organisation, Rajah Sulaiman, were charged with the bombing.

The Abu Sayyaf group of Muslim extremists has several hundred members based in the Sulu Archipelago and other parts of the southern Philippines. It has been involved in notorious cases of ransom kidnapping, including crew members of passing ships.

The Rajah Sulaiman group is made up of zealots who have converted to Islam.

The AFP has been working with Philippine security agencies to investigate links between the Abu Sayyaf, other militant Islamic groups that have been fighting for independence or autonomy for the Muslim minority in the southern Philippines, and the Southeast Asian regional terrorist network, Jemaah Islamiyah, which is based in Indonesia.

In March 2005, the Philippine military said it was told by a captured guerilla that the JI and the Abu Sayyaf were co-operating in many areas, among them training operatives in scuba diving on Palawan Island in the southern Philippines so that they could attack ships.

Another development that may well have prompted closer maritime security ties between Australia and the Philippines was the publication in December 2004 of a year-long study for the US Government by experts of the Sandia National Laboratory, a leading research facility dealing with nuclear arms and other weapons of mass destruction.

It provides the most detailed analysis to date of the potential impact of a terrorist attack on a laden LNG tanker.

But the conclusions that would have most concerned Canberra were those in the Sandia report that said terrorists, using readily-available weapons and technology, could blast a large hole through the double steel hull to penetrate one of the insulated tanks, causing a major LNG spill and, very likely, an intense fire.

The report evaluates a range of scenarios that would result in the release of millions of litres of LNG from a tanker.

They include external attacks using triggered explosions or rocket-propelled grenades or missiles, some of which are in the hands of Philippine extremists. They also include explosive-laden boats.

Concern about the vulnerability of LNG tankers was underscored last week. Yea Byeon-Deok, professor and LNG initiative co-ordinator of the International Association of Maritime Universities told an energy conference in Darwin, northern Australia, that to meet future demand for natural gas, more than 140 new LNG tankers had been ordered ranging in size from 100,000 tonnes to more than 200,000 tonnes.

"All we can say is that a 100,000-tonne tanker has four times the energy potential of the atomic bomb used to hit Hiroshima."

Australia's LNG exports to Asia are worth more than A$3 billion a year. With production expanding, the first shipments to China due to start soon and demand from Asia and California likely to grow fast over the next decade, Australia seems set to enjoy an LNG bonanza - provided it continues to be a reliable supplier with an unblemished record of security.

* The writer, a visiting senior research fellow at the Institute of South East Asian Studies in Singapore, is the author of A Time Bomb for Global Trade: Maritime-related Terrorism in an Age of Weapons of Mass Destruction, published by ISEAS.