ARF winner in gas crisis

North Perth-based biodiesel company Australian Renewable Fuels Ltd has restarted production at its Picton site, with the state's current gas shortage leading a prominent Western Australian company to place a purchase order with the producer this week.

Although production will be on a limited, demand-only basis, the 500,000-litre order is expected to be followed by a similar sized request in the coming weeks.

The order adds to the existing production request from a WA resources company for up to 7 million litres of pure biodiesel, with a supply of 1.5 to 2 million litres anticipated annually.

Gas supplies in WA were cut by a third last week following the explosion at Apache Energy's Varanus Island gas plant.

The cut to gas supplies has caused problems to companies throughout the state, including CSBP Ltd, Minara Resources Ltd and Iluka Resources Ltd, with Apache saying it may take at least two months until production at the gas facility resumes.

As a result, local companies are looking to alternatives such as biodiesel to meet their energy needs.

AR Fuels, which owns production plants in Picton, WA and Largs Bay in South Australia, will continue to keep the Largs Bay plant under care and maintenance.

Both plants were placed under care and maintenance in November last year, with AR Fuels, like many other biodiesel companies, having to change its business strategies as the rising cost of feedstock and tax changes caused disruption to the fledgling industry.

AR Fuels was hit by the rapid rise in tallow costs, with the eastern states drought and high demand from international soap producers causing the price to rise from $600 to $900 per tonne in the six months to November last year.

In a statement, AR Fuels said the diesel price rise had greatly alleviated the risks and exposures associated with high feedstock prices in biodiesel production.

Problems in the sector have not been limited to AR Fuels, with local counterpart Mission Biofuels Ltd changing its strategy and announcing it would only produce and sell biodiesel on a contract basis from it Malaysian plant, after a rise in the price of crude palm oil.