Explosion at Gas Plant Rocks Australia’s Mining Industry

An explosion at an Australian gas plant has left mining companies, metal refiners and other industrial users in Western Australia seeking alternative fuel sources.

The explosion on Tuesday, which caused a fire that lasted two days, has left uncertainty over when supplies might restart.

It is believed the incident was sparked by a fire that ruptured pipelines at the Varanus Island gas processing plant operated by Apache Energy, a unit of US-based Apache Corp.

Consequently, Ikuka Resources has been forced to halt mineral sands mining operation at its Mid West and South West operations due to the gas supply interruption.

Newcrest Mining, one of Australia's largest gold miners, has warned it has only limited supplies of diesel, while nickel miner Minera Resources, which is totally dependent on gas from Apache, has been forced to hunt for alternative fuels to remain operating.

The biggest buyers of Apache's gas include Rio Tinto, BHP Billiton and Alcoa, all of which have either reserve gas inventories or capabilities to switch to diesel.

About 330 million cubic feet of gas and 8,000 barrels of oil are typically produced daily at Varanus Island, which Apache contributes 200 million cubic feet of gas and 5,000 barrels of oil.

The Apache and Santos-owned John Brookes field and the Apache, Tap Oil and Kuwait Pertoleum Exploration-owned Harriet field have also halted production.

Woodside Petroleum has offered to help cover some of the shortfall.

There were no casualties as a result of the fire and workers were safely evacuated from the island.

"There has obviously been damage to the piping infrastructure and some control equipment, and we expect to have a clearer picture of the extent of the damage and the impact on supplies over the coming days," says Apache Managing Director Tim Wall.

By Alex Hawkes