Varanus reaches 70% gas output

Apache Energy Ltd has confirmed production at its Varanus Island gas facility has reached about 70 per cent while its parent company expects to seal a deal to sell gas from the Reindeer project at higher prices than existing agreements.

Government and public affairs manager David Parker told WA Business News that two out of three production trains were now in operation at the plant with plans progressing accordingly.

The facility is now producing around 210 terajoules of gas per day.

The facility was out of action for 64 days following a pipeline rupture and subsequent explosion at the island, which the Chamber of Commerce and Industry WA estimated could cost the state economy some $6.7 billion.

On August 6, partial production at Varanus Island began two weeks ahead of schedule and full production of 350tj is expected before the year is out.

The gas facility and the wider topic of energy security has been one of the major topics during the state election campaign.

Meanwhile Apache Corporation chief executive Steven Farris has reportedly told conference delegates in New York that it expects to sign, within two weeks, a seven-year deal to sell gas from the Reindeer project at higher prices.

Bloomberg reported that Mr Ferris said the supply contract, to be signed with a Chinese-backed iron ore project, will be priced at a "multiple" of the current $2 per thousand cubic feet that Apache is currently paid.

Earlier this year Apache and partner Santos Ltd committed over $800 million to develop the project with first gas production targeted by the end of 2010.

Mr Ferris was reported as saying the contract by itself will be enough to pay for the development of the project.