Global aluminium giant Alcoa is shoring up its West Australian gas supplies, indicating it will continue operating some of its ageing assets into the next decade.
The metals giant has secured a natural gas supply agreement spanning 2020 to 2032 which will help it meet around 75 per cent of its natural gas requirements in WA.
The agreement is conditional on a $US2.1 billion ($A2.73 billion) deal announced overnight by Apache Energy, which is selling its WA oil and gas assets.
Alcoa of Australia’s existing long term contracts are due to expire at the end of the decade.
Workers south of Perth were worried about potential job losses after the company announced a major restructure plan in March as part of a cost cutting drive.
But Alcoa of Australia managing director Alan Cransberg said the agreement would provide long term energy solutions for the company’s refining assets in WA and was good news for employees.
“While this contract alleviates most of our medium term need, we continue to be very concerned about the ability of businesses in Western Australia to secure long term, internationally competitive gas supplies,” Mr Cransberg said.
The company’s Kwinana refinery south of Perth is its least profitable and oldest processing operation in WA, employing more than 1,000 people.
About 4,000 people work at Alcoa operations in WA, including other alumina refineries at Pinjarra and Wagerup, and the Huntly and Willowdale bauxite mines south of Perth.
State One Stockbroking analyst Peter Kopetz said Alcoa’s deal with Apache would maintain supply and pricing.
“Alcoa, one of the state’s largest energy users, needs to be 100 per cent sure that it can get regular supply of energy,” Mr Kopetz said.
The move indicates the company will maintain its WA assets in the medium term as it upgrades and expands refineries.
“Australia is one of the cheapest operating regions they’ve got. The bauxite is pretty close by and they’ve got cheap energy so I don’t think they’ll be pulling out,” Mr Kopetz said.
US-based Alcoa swung back into the black in the three months to March, with a profit of $US195 million ($A254 million), thanks to its smelting division and higher alumina and aluminium prices.
The result was a turnaround from a $US178 million loss a year earlier, and was achieved despite $US168 million in restructuring costs.
Australian listed Alumina, a 40 per cent partner in Alcoa’s Australian operations, said its income from Alcoa was $29 million for the quarter, and it expected to receive more dividends from them for the rest of 2015.
Alumina shares closed three cents higher at $1.66.