04/06/2009 - 00:00

Industry calls for diversity of gas supply

04/06/2009 - 00:00


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AT 1.40pm on June 3 last year, an explosion ripped through US oil and gas producer Apache Energy's offshore gas plant on Varanus Island.

Industry calls for diversity of gas supply

AT 1.40pm on June 3 last year, an explosion ripped through US oil and gas producer Apache Energy's offshore gas plant on Varanus Island.

The fallout included a 30 per cent cut in the state's gas supplies, major disruption to a wide range of industries, and the decline in production for Western Australia's then booming mining and resources industry.

Twelve months on, after countless hours of investigations, a Senate inquiry, business losses in the millions of dollars, and calls for a state energy policy, the WA government will launch legal against Apache and its co-licensees.

But what lessons have been learned? What was the true impact to local business? What could have been done better to manage the gas shortage? And, if a similar event was to take place on Varanus Island, is the government prepared with a contingency plan?

"At the moment I have got to say there's a question mark over that," Energy Minister Peter Collier told WA Business News.

Chamber of Commerce and Industry WA estimates that, based on information from affected businesses, the outage cost local firms $2.4 billion in turnover in June and July 2008.

CCIWA chief executive James Pearson said while a gas supply emergency committee had been created to make recommendations to the state government, it was vital that the government develop a long-term energy policy to ensure domestic gas reserves.

"A year later, it's good that the government has acknowledged the need to learn the lessons from the incident about managing any shortages, looking forward to diversifying energy supplies, what's required to ensuring the state is fully prepared to respond swiftly and effectively should energy supplies again be disrupted, and it's doing that through the committee, which the CCI is part of," Mr Pearson said.

Neerabup-based forest industries company Wesbeam said the Varanus explosion highlighted a lack of diversity of gas supply in WA.

"I think the best thing is, and the government is doing that, is to ensure there are additional reserves for domestic use," Wesbeam chief executive James Malone said.

Alinta retail sales manager Ralph Bates said with the company set to lose $30 million as result of the Varanus explosion, it was essential to develop key energy infrastructure so the state was not vulnerable to relying on a single source.

That vulnerability has been highlighted by Burrup Fertilisers.

WA Business News understands that Burrup Fertilisers, which receives gas from Apache as its only feedstock, only now receives between 80 and 90 per cent of its contracted gas supply.

The $700 million Burrup Fertilisers project on the Burrup Peninsula suffered significantly following last year's gas outage, along with Tap Oil - which is a 12.22 per cent partner in the Harriet venture with Apache Energy (68 per cent) and Kuwaiti company Kufpec Australia (19.2 per cent).

The Harriet joint venture in 2002 signed a landmark contract to supply more than 600 billion cubic feet of natural gas over 25 years to the Burrup Fertilisers plant.

Iluka Resources general manager, investor relations and corporate affairs, Robert Porter, said the biggest lesson learned from the Varanus incident was the impact of having almost exclusive reliance on one source of gas and one pipeline to supply that gas.

"From a direct company point of view, the major lessons we learned was that we needed to have better risk mitigation from the point of view of other sources of fuel that we could utilise in the event of another such occurrence," he said.

The company now has LPG on site as a temporary source of power.

Apache Energy government and public affairs manager, David Parker, told WA Business News the company was working vigorously to have the repairs finished in the coming weeks.


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