03/12/2008 - 22:00

Doubts over $900m gas project

03/12/2008 - 22:00

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THE downturn in Western Australia's mining industry is starting to flow back to the energy sector, with Apache Energy understood to be reviewing its $900 million Reindeer gas project.

Doubts over $900m gas project

THE downturn in Western Australia's mining industry is starting to flow back to the energy sector, with Apache Energy understood to be reviewing its $900 million Reindeer gas project.

The planned project involves construction of an offshore gas platform and the onshore Devil Creek gas plant south of Karratha.

It is at an advanced stage, with engineering contracts awarded and a 200-person accommodation village largely complete.

However, when Apache spokesman David Parker was asked this week if the project was proceeding, he told WA Business News that the company had no comment.

WA Business News understands the project is under review, in part because Apache and its partner Santos are battling to finalise sales agreements with gas customers.

Cancelling or deferring the Reindeer project would cap a bad year for Apache in WA, after the Varanus Island gas plant explosion cut one third of the state's gas supplies.

The oil and gas sector has been relatively immune from the effects of the recent global slowdown.

Woodside is continuing to work on its $12 billion Pluto liquefied natural gas project and planning work is proceeding on LNG projects like Gorgon, Wheatstone and Browse.

While the LNG projects are focused on export markets, the Devil Creek gas plant was designed to service the domestic gas market.

Specifically that would have meant signing a major mining project in the Pilbara as the anchor customer.

It was only seven months ago that Santos announced its decision to go-ahead with the Reindeer project.

At that time, there was keen demand for gas, especially in the domestic market, but the sharp commodity slump has put several big mining projects on hold.

If Reindeer is deferred, it would adversely affect several contractors.

Most significant among these would be Clough, which has been awarded two major contracts - an engineering, procurement and construction contract for Devil Creek, valued at $260 million, and a contract for the installation of the Reindeer gas field's offshore facilities, worth $200 million.

Nomad Building Solutions has been working on the Devil Creek site since May on a 200-person accommodation village at a cost of about $19 million.

Emerson Stewart was another local company to win work on the project. In September it was contracted to provide engineering services for Devil Creek's storage and administration buildings.

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