The West

An aerial view shows Apache Corp.'s oil and gas processing plant on Varanus Island, off the northwestern coast of Australia, on Saturday, April 5, 2008. Australia is preparing for lower-than-anticipated economic growth because of the explosion of a natural gas plant in Western Australia two weeks ago, the Australian newspaper reported. Photographer: Angela Macdonald-Smith/Bloomberg News
An aerial view shows Apache Corp.'s oil and gas processing plant on Varanus Island, off the northwestern coast of Australia, on Saturday, April 5, 2008. Australia is preparing for lower-than-anticipated economic growth because of the explosion of a natural gas plant in Western Australia two weeks ago, the Australian newspaper reported. Photographer: Angela Macdonald-Smith/Bloomberg News

Apache is poised to approve a $200 million refurbishment and expansion of its Varanus Island gas hub, the first major investment in one of WA's most important infrastructure set-ups since an explosion ripped through the North West plant 4 1/2 years ago.

The US giant is seeking environmental approval for a 2 1/2 -year work program to upgrade facilities and accommodation on the island as well as add compressors.

Varanus Island is operated by Apache and processes gas for a variety of players in the Carnarvon Basin including Santos and Kufpec.

It caters for about 30 per cent of WA's domestic gas needs.

The primary driver of the proposed refurbishment is to install compressors to arrest a natural decline in flow rates from the John Brookes gas field, owned by Apache (55 per cent) and Santos (45 per cent).

Apache says the Varanus compression project had the potential to add 7800 barrels of oil equivalent a day to its net share of output from the hub. To put that in context, Apache expects to gain extra output of 8200bpd when the BHP Billiton-led $1.6 billion Macedon domestic gas development, in which it has a 28.6 per cent, comes into production next year.

It remains unclear when Apache will sanction the Varanus compression project. In May, Apache told shareholders its share of the project's cost was $US124 million ($119 million), which suggests an overall budget of about $200 million. Apache yesterday would not comment on the timing or budget for the Varanus project but confirmed that planning was advanced.

"Apache sees this as a significant investment in domestic gas capacity in WA and reinforcing the critical role of the Varanus Island gas hub," a spokesman said.

The project will include the installation of two gas turbine-driven compressors, a new power generator, upgrades of the island's wharves, replacing 16 four-to-six person accommodation modules with 20 new four-person units, and a new cyclone refuge building.

A pipeline rupture in June 2008 caused an explosion on Varanus Island that crippled the hub and badly disrupted gas supplies to WA for six months, costing industry billions of dollars.

The incident severely dented Apache's reputation at a time when it was gaining kudos for pursuing domestic gas developments such as the $1.1 billion Devil Creek joint venture with Santos.

The West Australian

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