The West Australian gas crisis continues to grow in importance with the Federal Government finally recognising its national potential.
Prime Minister Kevin Rudd told federal parliament yesterday that the gas explosion will slow exports and growth and also "flow through" to the national economy.
He said the blast will have a "significant” impact on gas supplies.
The potential must be serious because Mr Rudd didn’t make a similar statement on the impact of the serious central Queensland floods which slashed coal exports from February through May and left a big hole in our export income and the resources boom looking a little light on.
Nor has the Government made any comment about the impact of the flooding in the US Midwest which is starting to worry the US Government about its impact on food prices and inflation generally: something that will flow on to Australia.
There’s also serious flooding in southern China which has caused nearly 2 million people to be moved from their homes, flooded rivers, farm lands and affected the movement of products throughout the south east of the country. Coming on top of the Sichuan earthquake and the worst storms in 50 years across wide parts of China in January and February (which boosted inflation and coal prices, which helped Australian mining companies who could sell coal), the Chinese economy, the most important to Australia, has taken some mighty blows in the past five and a bit months.
It’s against this background that the WA gas dispute assumes some importance, especially if it cuts resource exports in the next three months and places further pressure on the value of the dollar and possibly overall economic growth.
The Federal Government says it will divert six megalitres of diesel fuel earmarked for the navy to WA to help ease the crisis.
Apache Corp says the blast at its Varanus Island facility offshore the north west WA coast will take at least three months to repair. More than 140 people are now working on the island starting repairs.
The explosion cut WA gas supplies by around a third and has already seen a growing list of mining companies announce cutbacks or declare fore majeure on supply contracts, with the major announcement coming from Alcoa and covering its huge alumina refineries south of Perth.
The prime Minister told Parliament that the Australian Defence Force had already agreed to give up the order for the diesel from a BP refinery in Western Australia to allow the refinery to supply industries hit by the shortage.
The government also said that if there was a need for additional diesel, it would consider releasing some from defence strategic reserves. WA said diesel demand has risen 40% since the blast and supplies in Asia are very tight because China has cut exports to divert diesel supplies to the quake zone in Sichuan where hundreds of electricity generators have been sent top provide emergency power to the survivors.
Mr Rudd also said in parliament that he had the authority to control the production and transfer and stock levels of crude and liquid fuel in cases of emergency.
"We are engaged with the Western Australian government as to the need for this course of action. We are advised at present by the Premier that action involving the invocation of that act is not required at this time.”
According to employer estimates, up to 15% of WA companies could be forced into a temporary shut down because of the crisis.
Apache Energy says about 20 of its industrial customers had been forced to seek alternative sources of energy.
The State’s two major refining companies BP and Caltex have boosted output of diesel shipments to WA to fill the energy supply gas caused by the supply crisis.
BP told Perth media that a 20 per cent increase in diesel demand had forced it to run its Kwinana refinery at full capacity.
The company said that it had lifted the amount of diesel it was importing and was planning for even greater demand as the crisis continued.
Caltex says the company has diverted extra supplies of diesel from the eastern states and the State’s south to Fremantle to cope with the demand.
Woodside says it has increased supplies by 50 terra joules a day and Shell is working with users to determine their needs and is only able to supply existing customers in the state.
Alcoa and companies including Minara Resources, Newcrest Mining and Rio Tinto have been forced to find new gas supplies or buy more diesel.
BHP Billiton is bringing forward a planned four-month rebuild of its WA nickel smelter furnace and will reallocate gas supplies to its Worsley alumina refinery south of Perth.
