Apache Can't Guarantee Varanus Supply Return Date

By Jason Scott

Dec. 5 (Bloomberg) -- Apache Corp., the U.S. oil and natural-gas producer that operates on five continents, said it can't guarantee its gas plant at Varanus Island off Western Australia will return to full capacity this month.

``Apache will not be drawn on the date when repairs are concluded and gas supplies are returned to pre-incident levels,'' spokesman David Parker said in a phone interview in the state capital Perth today. ``Apache is working toward introducing further gas brought online toward the end of the year.''

The company may still reach full supply by the end of 2008, the goal it said in August it was aiming to achieve, Parker said. He declined to give reasons for any potential delay to full resumption of supplies.

A June 3 explosion at the plant caused fuel shortages in the resource-rich state that generates a third of Australia's exports. Apache resumed two-thirds of supplies from Varanus in August.

The disruption left mining companies and businesses scrambling to secure fuel in a state where gas is burned to produce 60 percent of electricity. Apache declared force majeure, a legal clause that allows a company to miss deliveries because of circumstances beyond its control, on its Western Australia contracts after the explosion.

Many mining companies operating in Western Australia curtailed production because they specifically needed gas as part of the metallurgical process and to produce products such as ammonia nitrate, sodium cyanide and carbon dioxide.

Affected Customers

Apache declined to comment on whether any of its customers were still affected by energy shortages because of the explosion at Varanus Island due to confidentiality agreements, Parker said today. Burrup Holdings Ltd. will not be able to restart production at its Western Australian ammonia factory in early December because of a lack of gas, the Business Spectator reported today.

Australia's National Offshore Petroleum Safety Authority said in a report released on Oct. 10 that the blast was caused by Apache's ineffective protection of a gas pipeline against corrosion and inadequate inspection.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.net