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Australia : Fortescue signs deal for new Pilbara gas pipeline
Publish Date : 18-Jan-2014
A new joint venture (JV) is created by DBP Development Group (DDG) and TransAlta to construct a $178m, 270km gas pipeline that will run to Fortescue Metal Group's (FMG) Solomon Hub operations in the Pilbara.
The JV, to be called the Fortescue River Gas Pipeline, will operate from the Dampier Bunbury Natural Gas Pipeline (DBNGP) which is about 150km south of Karratha through to Solomon Hub, supplying natural gas to the 125 megawatt TransAlta power station that services Fortescue's mining operations in the region.
DDG, which is 100% possessed by DUET Group (DUE), will take a 57% interest in the JV, with TransAlta taking the other 43%. Duet said that the expected completion date for the project is 31 December, 2014 with funding to come from a $100m capital raising from institutional investors.
An initial 20-year, 100% take-or-pay contract with the venture which it says is expected to result in cost savings of US$20m per annum is signed by Fortescue (FMG).
Fortescue chief executive Nev Power said, "The pipeline to Solomon allows Fortescue to reduce operating costs and play a significant role in cutting emissions by switching stationary power generation from diesel to clean natural gas".
"The Fortescue River Gas Pipeline also represents a significant step in the gasification of the East Pilbara to the lasting benefit of the state of Western Australia."
The joint venture's likely to open up further investment occasion in the Pilbara was a theme reiterated by DBP chief executive Stuart Johnson, who said that the company was "hopeful that there will be opportunities for further expansion of the pipeline to other locations in the Pilbara."
Engineering group Monadelphous (MND) also declared that it had signed a contract with the joint venture in connection with the pipeline's construction.
