Gas deals still done: Woodside 15th June 2007, 8:00 WST Woodside...

Gas deals still done: Woodside

15th June 2007, 8:00 WST



Woodside Petroleum yesterday denied it was no longer marketing gas to domestic customers amid growing concerns that extra gas supplies will not be available when needed by local industry.

The Economic Regulation Authority (ERA) on Wednesday claimed the Woodside-run North West Shelf venture had stopped marketing gas to domestic buyers following a botched upgrade of domestic gas processing facilities that was to have boosted output by one sixth, or 100 terajoules a day.

But Woodside yesterday insisted it continued to negotiate with buyers.

“North West Shelf Gas is still out in the market actively talking to customers,” a Woodside spokesman said. The Shelf continued to meet all its contractual and domestic supply obligations under contracts that extended as far out as 2020.

It is believed Woodside withdrew two term sheets for the extra 100Tj when it became clear the upgrade had failed and is now investigating the problem.

The ERA doubts the extra production will flow before late next year, and believes construction of a third processing train to add another 300Tj/day is unlikely before 2014. It also doubts that any other major new supplies will be available for five to seven years.

But according to the WA Domgas Alliance, which represents big gas customers such as Alcoa and Alinta, demand will rise 50 per cent, or 500Tj/day, over that period.

Alcoa declined to comment yesterday, but it has repeatedly warned that a secure and cost-effective gas supply is vital for a $1.5 billion Wagerup alumina refinery expansion to proceed.

Iron ore miner Gindalbie Metals was also unable to secure a long-term gas supply contract for its planned $1 billion Karara magnetite project in the Mid-West and is instead negotiating with groups proposing new coal-fired power stations for the region.

“We couldn’t find anyone willing to consider supplying gas for more than five years … which really would have made our project vulnerable,” managing director Garret Dixon said.

Gold giant Newmont Mining has already opted for coal-fired power at its $2 billion Boddington gold mine and has just joined the Domgas Alliance because it fears it will be unable to secure gas for the Parkeston power station and Super Pit gold mine in Kalgoorlie when its existing contracts expire in 2010.

However, Precious Metals Australia last month struck a $35 millon, three-year deal for its Windimurra vanadium mine for gas from Santos’ John Brookes gasfield off Karratha.

And Citic Pacific managing director Henry Fan yesterday told WestBusiness that his company had “been able to resolve the gas supply issue” for its $3 billion Cape Preston magnetite project in the Pilbara.

Citic Pacific is understood to be negotiating with Santos for the supply of up to 120Tj/day from 2010. That would soak up all remaining gas at John Brookes and all of the gas at Santos’ proposed Reindeer development nearby.

JOHN PHACEAS