2nd UPDATE: W Australia State To Prosecute Apache Over Blast

PERTH (Dow Jones)-U.S. energy group Apache Corp. (APA) said Thursday that it will defend itself against charges filed by the Western Australian government in relation to the Varanus Island fire and explosion last year.

Apache will "vigorously defend" the state's legal action," an Apache spokesman told Dow Jones Newswires. "The explosion was an unfortunate and unforeseeable event," he said.

Western Australian Mines and Petroleum Minister Norman Moore said earlier Thursday the government has filed charges against Apache and its co-licensees in relation to the pipeline rupture and explosion at the Varanus Island gas processing plant, off the state's northwest coast, on June 3 last year.

The government is alleging they failed to maintain the pipeline in good condition and repair as required by law.

"It is alleged that the 12-inch sales gas pipeline was corroded in the area of the pipeline rupture," the minister's office said in a statement.

A spokeswoman for Western Australia's Department of Mines and Petroleum said that the co-licensees face fines of up to A$50,000 each under the relevant state act. The charges have been filed against Apache Northwest Pty Ltd., a unit of Apache Corp., Kufpec Australia Pty Ltd., a unit of Kuwait Foreign Petroleum Exploration Company, and Tap (Harriet) Pty Ltd, a unit of Australia's Tap Oil Ltd. (TAP.AU).

The case has been listed for hearing in Perth's Magistrates Court on July 22, the spokeswoman said.

The explosion disrupted one-third of the state's gas supplies, forcing many miners and industrial users to scramble for fuel alternatives.

"The Varanus Island repair project is now in its final phase and drawing to a conclusion," the Apache spokesman said, adding that production at the facility is now running at more than 90% of the pre-incident rate.

 
  -By Stephen Bell and Alex Wilson, Dow Jones Newswires; 61-8-9244-4243; [e-mail]