Door open for Apache claims

THE state government will prosecute Apache Energy over the Varanus Island explosion, but many businesses believe the response pales in comparison with the Victorian Esso-Longford explosion of 1998, which generated a Royal Commission.

While few businesses are willing to comment publicly on their legal pursuits, questions are being asked whether prosecuting Apache and its co-licensees is worth the effort, as the maximum penalty possible for each is just $50,000.

Those charged - Apache, Kuwaiti group Kufpec Australia, and Perth-based Tap Oil - make up the Harriet gas joint venture, which supplies gas to other WA users through the Dampier-Bunbury pipeline, such as Alinta, Wesfarmers and Alcoa.

Mines and Petroleum Minister Norman Moore said the charge filed in the Federal Court on May 27 alleges that the joint venture failed to maintain and repair a gas pipeline that exploded last June.

Apache Energy government and public affairs manager David Parker said Apache would vigorously defend the prosecution.

"I just want to reiterate that the gas explosion was an unfortunate and unforeseeable event," Mr Parker told WA Business News.

ERM Power, which owns and operates a gas-fired power plant at Kwinana that supplies about 10 per cent of the South West's electricity, has yet to get a full supply of gas and is considering taking legal action against Apache.

Wesfarmers, which lost more than $65 million as a result of the explosion, said earlier this year it was continuing negotiations with Apache in relation to a force majeure and would not rule out seeking compensation through legal avenues.

Newcrest spokesperson Daryl Corp said the gold miner was pursuing a claim against Apache Energy through its insurers.

"Newcrest has reserved all of its rights under its gas supply arrangements or otherwise in connection with the incident," he said.

Iluka Resources general manager, investor relations and corporate affairs, Robert Porter, said while the incident cost the company about $13 million it had no plans to take legal action against Apache because its contractual arrangements were through Alinta.

Alinta retail sales manager Ralph Bates said the company lost about $40 million following the incident and has claimed $10 million through its insurance brokers, the maximum under the company's insurance policy.

Tap Oil has a comprehensive insurance package covering its interests in the Harriet venture and this month received a third interim payment, which has brought its total payments received to more than $16 million. The company could not be reached for comment before going to press.