Alinta May Scrap Power Plant After Gas Accord Lapses

(Update2)
By Angela Macdonald-Smith
June 26 (Bloomberg) -- Alinta Ltd., Australia's biggest energy transmission company, may scrap a proposed A$230 million ($195 million) power project in Tasmania after an agreement to buy natural gas for the plant lapsed.
Alinta's A$600 million accord to buy gas from Anzon Australia Ltd. and Beach Petroleum Ltd. to fuel the proposed Tamar Valley power plant won't go ahead after the partners deferred plans to develop gas output at the field, Perth-based Alinta said today in a statement to the Australian Stock Exchange.
Anzon, based in Sydney, and Adelaide-based Beach said earlier today they will delay plans for gas production at the Basker-Manta-Gummy project off Australia's southeastern coast and instead continue expanding oil output, which is more profitable. They had agreed to sell 225 petajoules (214 billion cubic feet) of gas from the field, also known as BMG, to Alinta over 15 years starting in 2009.
``This is a significant setback to the Tamar Valley power station project and Alinta is now carefully considering all the options available to it in terms of meeting the needs of the Tasmanian energy market,'' Jim Hennessy, executive general manager of Alinta's energy unit, said in the statement.
The lapsing of the gas supply accord means Alinta's conditional agreement to supply electricity from the proposed 200-megawatt Tamar Valley plant to Aurora Energy will also lapse, Hennessy said.
Anzon Declines
Shares in Anzon fell 11 cents, or 8.8 percent, to A$1.14 on the exchange, while Beach stocks closed 0.3 percent lower at A$1.47. Alinta shares rose 0.2 percent to A$15.23.
``Oil is the major source of profitability for the project and is the first priority of further development activity,'' Anzon and Beach said in a joint statement. ``The BMG joint venture expects to commit to a gas development within the next 12 months with any future gas off-take arrangements to complement the optimized oil development plan.''
The Basker-Manta-Gummy venture is considering committing to using a larger production vessel at the field to accommodate an increase in oil output in advance of the proposed gas production, the partners said.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net