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Rio struggling to negotiate gas deal by: MATT CHAMBERS From: The Australian December 03, 2013 12:00AM

MINING giant Rio Tinto has admitted it is struggling to get Queensland gas sellers to the bargaining table in further evidence of a looming east coast gas shortage as $70 billion of LNG plants crank up at Gladstone from next year.

Rio's head of bauxite and alumina, Pat Fiore, said the company was not so much worried about prices that are predicted to double or triple as whether there will be any available gas when contracts roll off at its recently expanded gas-fired Yarwun alumina plant at Gladstone.

"We're not asking for preferential prices or that sort of thing, we're just asking for there to be a market in eastern Australia," Mr Fiore said.

"Right now we're struggling to attract anyone to the table to negotiate."

The three LNG plants being built concurrently on Curtis Island to export coal-seam gas will raise east coast demand fourfold in a couple of years and make domestic users compete with Asian buyers prepared to pay triple traditional Australian gas prices.

Potentially worsening the situation is persistent industry talk, which is denied by the proponents, that many of the thousands of CSG wells that will supply the LNG plants are not performing as expected.

Mr Fiore said it was hard to get anyone to land a long-term agreement because there wasa shortage of gas when Rio needed it.

He would not say when Rio's contracts expired but its believed new gas contracts are needed by Yarwun in the next few years.

"Our understanding is it doesn't seem like they have the (gas) molecules to send to us."

Mr Fiore was speaking at the Weipa bauxite mine on Cape York Peninsula, where Rio yesterday celebrated its 500 millionth tonne of bauxite shipped from Weipa Port and its 50th year of operation.

Weipa ships about 12 million tonnes per year of bauxite to Yarwun and the coal-powered QAL it owns in an 80-20 joint venture with Russia's Rusal.

Rio's situation comes despite assurances from Queensland's biggest suppliers, AGL Energy and Origin Energy (which half-owns the Australia-Pacific LNG plant being built at Gladstone) that there is available gas.

The shortage talk comes despite the Arrow Energy joint venture between Shell and PetroChina not having committed to an LNG plant and having a lot of CSG reserves.

But Arrow's owners appear intent on saving their gas for export through another LNG train, meaning its vast reserves are not likely to be used to ease the domestic situation.

They are also in no hurry to develop their CSG fields because of the high cost of construction in Australia.

Another company with Queensland gas reserves is Westside Corporation, which is pursuing talks with local gas buyers and the big plants after a takeover bid last year from PetroChina fell through.

A recent deal by BG Group, one of the three Gladstone proponents, to buy gas from Origin Energy, led Deutsche Bank to draw the conclusion BG was struggling with well productivity. BG chief Chris Finlayson said last month that the company's wells were performing as expected.

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