04/06/2008 - 15:30

WA miners brace for gas disruptions

04/06/2008 - 15:30

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Some of Western Australia's largest mining companies are bracing for production disruptions after yesterday's explosion at the Varanus Island gas plant, which could force its operator Apache Energy Ltd to pay compensation to its customers.

WA miners brace for gas disruptions

Some of Western Australia's largest mining companies are bracing for production disruptions after yesterday's explosion at the Varanus Island gas plant, which could force its operator Apache Energy Ltd to pay compensation to its customers.

Mineral sands producer Iluka Resources Ltd, nickel miner Minara Resources Ltd and zinc-copper miner Jabiru Metals Ltd have all reported today their respective operations will be affected by the incident.

Apache yesterday shut down the plant after a pipeline rupture and fire at its Varanus Island gas processing facility, located about 100km from Karratha off the WA coast.

Iluka said it had started a staged shut-down of parts of its South West and Mid West operations while Minara's Murrin Murrin operation has already been interrupted.

West Perth-based Jabiru joined the list of miners including gold producer Newcrest Mining Ltd and Newmont Mining Ltd, and aluminium producer Alcoa Inc, which have all made the switch to diesel to power key operations.

Newcrest could be worse off compared to its resource peers, with the miner saying its onsite diesel stocks were limited.

The Varanus operations supply about 35 per cent of the state's domestic gas, with between 80 and 90 per cent going to more than 20 major industrial customers, including gas and electricity retailers, ammonia plant operator Burrup Holdings, BHP Billiton's Newman and Nickel West mines and Rio Tinto's iron ore mines in the Pilbara.

Meanwhile, Apache said it will discuss the possibility of compensating industrial customers affected by disrupted gas supplies, however it first needed to investigate the cause of the explosion.

"The lines have to be repaired ... and we need to look at the degree of damage, not only the pipelines but also the facility," Apache managing director Tim Wall told journalists in Perth.

"It can be repaired fairly quickly, I would think.

"We need to get everything under control.

"It (compensation) is something we'll have to discuss with customers."

While the cause of the pipeline rupture remains unknown, Mr Wall said a thorough investigation into the incident would "be ready in a couple of days".

Apache has declared force majeure, a contractual clause which removes its liability to customers when an extraordinary event prevents it from fulfilling its obligations.

North West Shelf Venture operator Woodside Energy Ltd late yesterday offered to assist Apache in dealing with the incident, saying it would try to provide some spare gas to make up the shortfall in pipeline gas supply.

Earlier this year Woodside also faced a similar situation, when an electrical fault forced it to shut down its Karratha gas plant.

The Chamber of Commerce and Industry WA and the state opposition have called on the Carpenter government to urgently develop a state energy policy, saying the latest incident exposed WA's dependence on a limited number of gas sites.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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