Jan. 2 (Bloomberg) -- Australia's North West Shelf venture halted production due to an electrical fault, stopping output at the nation's biggest liquefied natural gas project and cutting two-thirds of Western Australia's gas supplies.

Gas production for customers in the state should resume late tomorrow, while LNG output will restart after that, Perth-based Woodside Petroleum Ltd., the venture operator, said today in a statement. The shutdown will result in power shortages tomorrow, said Western Power Corp., the grid operator.

The A$20 billion ($18 billion) North West Shelf venture runs four LNG production units with a capacity of 11.9 million metric tons a year and is the biggest supplier of gas into the Western Australian market. The stoppage halved deliveries through the state's largest gas transmission line and put about a third of its biggest power producer's plants out of operation.

``There's never been an incident as significant as this,'' said Mark Cooper, general manager commercial at Dampier Bunbury Pipeline, owner of the gas transmission line that takes fuel from the North West Shelf fields to customers in the southwest. ``All process plants have issues from time to time for a few hours here and there. This is the first one that's been this significant.''

Other natural gas producers such as Apache Corp.'s Varanus Island venture are still delivering gas into the pipeline, yet deliveries may be cut to about 400 terajoules (377.2 million cubic feet) in the 24 hours to 7 a.m. tomorrow, down from the about 750 terajoules expected earlier, Cooper said in a telephone interview.

`Significant Reduction'

``It's a significant reduction on normal flows,'' he said.

State-owned Verve Energy, Western Australia's third-biggest gas user and the largest power producer, has about 1,000 megawatts of generation capacity out of action because of the shutdown, said Peter Winner, a Perth-based spokesman. Plants able to use different types of fuel have been switched to oil instead of gas, while the coal-fired plants are running ``flat chat,'' he said.

The effect on power supplies may be more significant tomorrow when temperatures are forecast to rise to about 40 degrees Celsius (104 Fahrenheit), he said. Plants have been shut at Cockburn, Pinjar and Worsley and won't resume until tomorrow at the earliest, he said.

``Due to this major incident on the North West Shelf, there will be a shortage of power available from public and private generators tomorrow,'' Doug Aberle, managing director of Western Power, said in an e-mailed statement.

Power Blackouts

Electricity customers need to cut energy use to avoid blackouts, Aberle said. About 20 percent of the state's power generators are affected by the stoppage, he said.

The effect on gas customers depends on the contracts they hold with the North West Shelf venture, Dampier Bunbury's Cooper said.

``We have had discussions with a number of gas users about what some of their options might be and we are assisting to the extent that we can out of our own gas inventory in the pipeline, but that's very limited,'' he said. ``We're doing what we can, but at this stage we are really the victim in the middle.''

Customers have been advised of the shutdown, which occurred at 8 a.m. Perth time today, said Woodside, which is 34 percent owned by Royal Shell Group Plc.

``Woodside does not believe that the production disruption will materially affect its production forecast for the year,'' the company said in the statement, which was lodged with the Australian Stock Exchange. The cause of the incident, which may be related to the commissioning of some new equipment, is being investigated, it said.

LNG Deliveries

The North West Shelf venture has LNG customers in Japan, South Korea and China. It is too early to say whether LNG cargoes will have to be rescheduled, said Kirsten Stoney, a spokeswoman for Woodside. Woodside has a one-sixth share of the project, while BHP Billiton Ltd., Shell, Chevron Corp., BP Plc and a venture between Mitsubishi Corp. and Mitsui & Co. also own stakes.

Alcoa Inc., the world's biggest alumina producer and Western Australia's biggest gas user, said its three alumina refineries in the state switched to alternative fuel today, and is still obtaining gas from other suppliers.

``Alcoa anticipates the supply interruption will have relatively minor impacts on refinery output,'' Tim McAuliffe, a Perth-based spokesman for the company, said in a statement.

Paul Simshauser, chief executive officer of Babcock & Brown Power, owner of AlintaAGL, Western Australia's biggest gas retailer, couldn't be reached for comment.

The North West Shelf venture supplies about 65 percent of Western Australia's gas demand, Woodside says on its Web site.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.netTheresa Tang in Hong Kong at ttang3@bloomberg.net

Last Updated: January 2, 2008 04:22 EST