Western Australia’s biggest gas user, Alcoa, is continuing to cut production of alumina and burn expensive diesel, and an ammonia plant has shut down for the second time as Australia’s most gas-dependent state enters its seventh week of problems with the supply of the crucial fuel.
On Thursday, separate Santos and Chevron plants processing offshore gas for domestic use struck problems sending the WA gas market – already under pressure after a leaking pipe shut down a Santos gas platform six weeks ago – into disarray.
Alcoa has cut production by 30 per cent at one of its three alumina refineries that make the aluminium ingredient from bauxite ore mined in south-west forests, and since Friday has been burning diesel to reduce gas use at two of the plants.
The problems would have been worse had the US company that manages the 4000-employee operation, 40 per cent owned by ASX-listed Alumina Limited, not secured additional gas from other suppliers.
Norwegian fertiliser manufacturer Yara has again stopped producing ammonia in the Pilbara after an earlier closure due to Santos shutting down its John Brookes gas platform in November.
Offshore safety regulator NOPSEMA has forbidden a return to production until Santos determines why gas escaped from a pipeline connection on the seabed near the platform and convinces it there will be no more similar leaks. Until then, gas supply to WA’s biggest gas plant on Varanus Island is reduced by about 80 per cent.
Chevron’s Wheatstone gas export plant stopped supplying the local market last Thursday after a pump used to clean gas for the local market failed. Full production is expected to resume this Thursday.
Santos declined to say when its Devil Creek gas plant, which also struck problems last Thursday, would return to full production, or what the problem was.
A gas bulletin board run by the Australian Energy Market Operator shows Varanus Island is expected to return to full production on January 27, and Devil Creek will follow two days later.
A combination of historically low prices and poor coal supply compared with the eastern states has made gas the fuel of choice in WA. Gas provided 36 per cent of the power on the state’s main south-west grid in the past 12 months, compared with seven per cent in the National Electricity Market.
Energy minister Bill Johnston said that gas and power supply to homes would not be affected.
The current problem is the biggest disruption to gas supply in WA since 2008 when a series of huge explosions damaged the Varanus Island plant before it was operated by Santos. At the time, there were fewer gas suppliers to cover the shortfall and WA’s economy was estimated to suffer a hit of up to $3 billion.
A state government report that then operator of Varanus Island Apache Energy took legal action to suppress blamed the accident on the US company’s focus on cost and urgency. Alcoa took legal action against Apache for losses incurred that was only settled in 2015 to allow Apache to sell its WA assets.
Source: Thanks smh.com