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Comalco focuses on Australia refinery site,PNG gas

BRISBANE: Australasian aluminium group Comalco Ltd on Monday narrowed the site for a proposed A$1.4 billion (US$840 million) alumina refinery to the Australian state of Queensland, knocking Malaysia's Sarawak off the list.

Comalco said it would conduct a final feasibility study into building the refinery in the coastal city of Gladstone near its Boyne Island smelter and south of its plentiful bauxite reserves on the northern tip of eastern Australia.

Directors would make a final decision on the go-ahead once the study had been completed in a few months.

Comalco chief executive Terry Palmer said the company was committed to taking PNG pipeline gas through a cogeneration plant for its refinery, which could eventually have a joint venture partner.

Palmer said the competitive gas price negotiated through the state government's energy retailer Energex was one of the primary reasons for choosing Gladstone.

Chevron Corp, the US oil giant and leader of the A$3.5 billion PNG project, said the plans to build a pipeline between the two countries would be boosted by Comalco's decision.

"The announcement increases certainty of gas sales volumes and clearly adds to overall levels available to us," PNG gas project leader and Chevron executive John Powell told Reuters.

INCENTIVES PLAY KEY ROLE

Palmer said the decision to choose Gladstone rather than Sarawak included A$250 million of incentives from the Australian and Queensland governments.

Without this, "Gladstone just wouldn't have been there".

He said the company would consider bringing in a joint venture partner but said Comalco would keep control of operating the plant.

"That could happen at any stage, right up front or up until we are running. Obviously if a partner comes on in the early stage, it would bear the risk," he said.

There were no concrete discussions with potential partners at the moment.

Most of the 1.4 million tonnes a year of alumina produced at the refinery would be used in Comalco's smelting operations in Australia, although there would also be a small amount sold onto the world market.

This was Comalco's third attempt to build a greenfields alumina refinery operation, Palmer said.

Comalco shares were up one cent to A$9.39 in late Monday trade, with brokers saying the lacklustre showing was due to disappointment that the project has not yet been given the green light.

Anglo-Australian miner Rio Tinto Plc owns 72 percent of Comalco and has launched a takeover bid which analysts expect Comalco shareholders to approve.-Reuters