PERTH (miningweekly.com) – ASX-listed Fortescue Metals has moved to further reduce operating costs at its Pilbara operations by signing a long-term gas transportation agreement.

The miner reported on Thursday that gas would be delivered from the existing Dampier to Bunbury natural gas pipeline and the new A$178-million Fortescue River gas pipeline to a power station at Solomon Hub.

The 270 km Fortescue River pipeline would be built, owned and operated by a joint venture (JV) between ASX-listed Duet Group and TransAlta. Duet Group would hold a 57% interest in the JV, with the company undertaking a share placement to raise $100-million to fund the construction of the project.

Project house Monadelphous has been awarded a A$100-million construction contract for the gas pipeline, with completion expected late in 2014.

Fortescue CEO Nev Power said on Thursday that the development of the Fortescue River gas pipeline was a key component of the company’s broader strategy to reduce energy costs and carbon emissions.

The conversion of the 125 MW Solomon power station from diesel to gas would underpin the initial stage of the Fortescue River gas pipeline, and was expected to save Fortescue some $20-million a year.

“The pipeline to Solomon allows Fortescue to reduce operating costs and play a significant role in cutting emissions by switching stationary power generation from diesel to clean natural gas,” Power said.

“The Fortescue River gas pipeline also represents a significant step in the gasification of the East Pilbara to the lasting benefit of the state of Western Australia. TransAlta, our existing partner at Solomon, and Duet Group, have outstanding reputations with proven capabilities within the energy infrastructure industry.

“Their expertise will allow Fortescue to focus on its core business of efficient, low-cost delivery of iron-ore to customers in China and South East Asia,” he added.

The 100% take-or-pay contract between Fortescue and the Duet/TransAlta JV  would last for a period of 20 years.