Joint venture to build gas pipeline servicing Murchison region [Audio]

August 19, 1998

A new 530km pipeline, servicing communities and mineral resource projects in the Murchison, will be built by a joint venture involving Western Power and the Australian Gas Light Company (AGL).

Resources Development and Energy Minister Colin Barnett said today that the State Government would assist Western Power to participate in establishing the pipeline in order to allow cheaper, more environmentally-friendly electricity to be generated in the region.

The pipeline would be constructed initially from the Dampier to Bunbury Natural Gas Pipeline (DBNGP) to Mt Magnet. A second stage would see gas delivered to Cue, then Meekatharra.

The Minister said that the catalyst for the $72 million pipeline was Precious Metals Australia Limited's (PMA) $110 million vanadium mine and processing plant at Windimurra, 85km south east of Mt Magnet. PMA had previously conducted feasibility studies into the project and last week, with its joint venture partner Glencore International AG, announced its go-ahead.

The PMA project will employ up to 400 people during construction and 100 people permanently, with the Windimurra site to produce more than 10 per cent of the world's vanadium. Construction of the project is due to start by the end of this year and commissioning expected in the fourth quarter of next year. A lateral pipeline will also be built from Mt Magnet to the Windimurra mine site to supply the project with gas.

Up to 85 per cent of vanadium is used in alloying steel in order to make it stronger and more ductile. Vanadium has a wide range of uses - in tool steels used to make spanners and other tools, reinforcing bars, in the chemicals industry, and as a catalyst in the production of sulphuric acid.

Mr Barnett said the pipeline would be owned and operated by a 50/50 joint venture between Western Power Corporation and the Australian Gas Light Company (AGL).

"The Mid West pipeline was initiated in response to the Windimurra project in this highly prospective region of Western Australia which the Government is keen to see develop and prosper," he said.

"The availability of gas to the area will be a huge boost to the regional economy and will inevitably provide the incentive for further major resource development."

Mr Barnett said the new energy infrastructure would most likely see existing diesel-fired power stations servicing the towns of Mt Magnet, Cue and Meekatharra replaced with gas-fired power stations operated by either Western Power or a private sector generator.

This would lead to a reduction in Western Power's more than $3 million yearly losses in the area and has the potential to significantly improve competitiveness in the mining sector for existing and future projects.

"This project is also consistent with the Government's recently-announced electricity supply policy for remote regional areas of the State which encourages private sector generation of electricity in such areas at lower than current costs," the Minister said.

"As the pipeline project will not generate a sufficient return for Western Power in the immediate future, the Government will assist the electricity corporation by meeting the interest payments on a loan of up to $20 million until gas throughput is sufficient for the pipeline to be self-sustaining."

Mr Barnett said the vanadium project and the associated gas pipeline would be an enormous boost to the regional economy and justified the Government's confidence in advancing industrial infrastructure in the area.

"The availability of gas in the Murchison will significantly enhance its attractiveness for resource investment, provide a boost to local service industries, infrastructure and social services in regional towns and, on an environmental level, will reduce carbon dioxide emissions compared with diesel fuel by more than 15 per cent," he said.

"The State will benefit from the considerable reduction in the cost of providing electricity in the region and will remove uncertainty about the adequacy of future power supplies to regional centres such as Mt Magnet and Meekatharra.

"Other benefits to the State will flow from the vanadium project itself through mineral royalties, payroll tax and jobs growth."

Media contact: Justine Whittome, (08) 9222 9699