25/06/2008 - 13:43

Gas crisis costing $20m/mth: Wesfarmers

25/06/2008 - 13:43

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Wesfarmers Ltd says its pre-tax earnings will be cut by up to $20 million a month, as the company feels the impact of gas outages following an explosion that closed down the Varanus Island gas plant.

Gas crisis costing $20m/mth: Wesfarmers

Wesfarmers Ltd says its pre-tax earnings will be cut by up to $20 million a month, as the company feels the impact of gas outages following an explosion that closed down the Varanus Island gas plant.

"There are a number of impacts on our profits," chief executive Richard Goyder told the stock exchange in a question and answer session with corporatefile.com.au.

"At this stage, our best estimate is that the pre-tax impact on Group profit will be up to $20 million per month at the current level of gas supply.

"A portion of that loss is expected to be recovered from insurance."

The Varanus Island gas plant has been closed since June 3 following the explosion, which cut off 30 per cent of the state's domestic gas supply.

Operator Apache Energy Ltd expects partial production to resume in mid-August and the plant to be operating at full capacity by December.

The gas shortage has mostly affected Wesfarmers' chemicals and fertilisers division and its energy division, CBSP which has been forced to ship in more ammonia after it suspended production of the chemical and sodium cyanide.

Mr Goyder said CSBP has secured a an ammonia shipment of around 23,000 tonnes which will arrive later this month.

The shipment should enable CSBP to produce suffiicent ammonium nitrate for the mining sector throughoutt July and into early August.

"Based on existing stock and current consumption levels, CSBP should have sufficient sodium cyanide stock to supply to customers for several weeks," Mr Goyder said.

"We remain hopeful that sufficient gas will become available in the next couple of weeks to enable production of sodium cyanide for the domestic market."

Meanwhile the commissioning of a $138 million, 175 tonne per day Kwinana LNG plant has been delayed while the the commissioning of the new ammonium nitrate prill plant at Kwinana was continuing and is due to begin production in the next week or so.

Mr Goyder said the another Kwinana LPG extraction plant was operating at lower output with one train shut down due to reduced gas flows and loss of high LPG content gas from Apache.

"Wesfarmers LPG may import product to ensure ongoing LPG supplies to domestic markets," he said.

The impact on Wesfarmers' insurance division is being assessed, but the company expects it to be minor as it has little exposure to large industrial operations.

Mr Goyder said Wesfarmers had not had to stand down workers.






 

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