Miners hobbled by gas shutdown at Apache Energy

HUNDREDS of millions of dollars in revenue could be wiped from the balance sheets of mining companies affected by the shutdown of Apache Energy's Varanus Island gas processing plant in Western Australia.

Many of the miners have been forced to switch to diesel, a much more expensive and strictly short-term solution.

DJ Carmichael head of research Paul Adams said the companies most affected would be Minara Resources, BHP Billiton, Rio Tinto, Iluka, Oxiana, Newcrest, Burrup Holdings, Alumina, Alcoa, Santos, Origin Energy, Tap Oil, Jabiru Metals and Newmont Mining.

Dow Jones reported yesterday that Alcoa, which obtained a quarter of its energy supplies from Apache, would have already been hit to the tune of at least $10 million in increased costs while it sought alternative energy supplies.

Supplies of diesel in industrial quantities were likely to run short very quickly, Mr Adams said.

He said the lack of fuel might force mining companies to shut their operations temporarily and make staff take accrued annual leave, keeping only skeleton crews on site.

Months before Apache gas supply returns

It will be at least two months before Apache Energy's Varanus Island gas processing facility, off the coast of Karratha in Western Australia, will return to partial production.

Managing director Tim Wall told journalists visiting the island on Friday that one of the processing plants for the John Brookes and East Spar joint ventures had received little damage from Tuesday's explosion and fires.

But the second plant for the Harriet joint venture was badly damaged.

The former would be repaired and brought back into production first, Mr Wall said.

"Partial sales will occur in a couple of months, after we repair two sales pipelines to the mainland, Mr he said.

"Getting this stuff out of Varanus is the problem."

Mr Wall said the John Brookes and East Spar plant would produce between 150 and 200 terajoules of gas per day, more than half of the roughly 370 terajoules per day output from the island at full capacity.

Gas production from both joint ventures is currently completely shut down.

Valve equipment required to repair the facility on the island may take some time to source internationally.

An explosion and fire on the island on Tuesday knocked out 30 per cent of the gas supply for the state's domestic needs, threatening many industry sectors and leaving some regional areas at risk of blackouts.

Mining companies say they face losses amounting to hundreds of millions of dollars.

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Gas Crisis Grips Australia's Boomtown, Threatens Jobs (Update2)

June 23 (Bloomberg) -- Richard Hyland spends each afternoon calling Alinta Ltd. to plead for electricity to keep the kilns fired at Midland Brick, the world's largest brickworks, in Perth, Western Australia.

Manufacturers, mines and small businesses across the state are vying for power after a June 3 explosion cut natural-gas supplies to generators by 30 percent. The shortages will last until December, Houston-based Apache Corp., owner of the damaged plant, said today.

``About 30 percent of our members specifically need gas as part of the metallurgical process; without it they just can't operate,'' Howard-Smith says. ``They need this gas to create products like ammonia nitrate, sodium cyanide and CO2. If they can't produce these products, it filters down to the end users, like the pubs and abattoirs.''

That means supplies of draught beer, which uses carbon dioxide for its fizz, and meat from Harvey Beef, which uses gas- heated water to sterilize tools, are under threat.

``When it gets to the stage where you can't pour a beer in a pub, you know this crisis has the potential to affect every aspect of business,'' says Bradley Woods, CEO of the Australian Hotels Association's West Australian branch.