June 26 (Bloomberg) -- Western Australia said the gas plant explosion that cut almost a third of the state's supplies has reduced deliveries of the fuel to the mining industry in the Pilbara region by 45 percent.

The state's Goldfields region has 20 percent less gas than before the June 3 blast, Western Australia's Office of Energy in Perth said in a presentation posted on its Web site. Supplies to large companies in the South West have also dropped by a fifth.

Newcrest Mining Ltd., Alcoa Inc. and Fonterra Cooperative Group Ltd. are among companies switching to diesel from gas after the explosion at Apache Corp.'s plant on Varanus Island. Caltex Australia Ltd. has diverted two cargoes of diesel this month to meet additional demand.

``The situation is very challenging, but at present generating capacity is being carefully managed in a way that should see no interruption to supply either in the South West, North West or the many isolated power systems across the state,'' the Office of Energy said in the presentation, dated yesterday.

The cost of diesel is around 10 times higher than gas, it said. Demand for diesel is 30 percent higher than usual following the gas shutdown, it said.

About 46 percent of gas users in the state have cut back operations, 26 percent have switched to diesel and 28 percent have found alternative gas supplies.

Apache expects to resume 57 percent of supplies from Varanus Island by mid-August, the Houston-based company said June 23, with full production to be restored in December. The plant accounts for 30 percent of the state's gas supply.

The gas shortage caused by the shutdown at Varanus Island, 60 miles (97 kilometers) from Karratha on the northwest coast, may cut earnings at BHP Billiton Ltd., Newcrest and other mining companies in the state by a combined A$500 million ($475 million) this year, Southern Cross Equities Ltd. estimated this week.

To contact the reporter on this story: Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net

Last Updated: June 26, 2008 02:07 EDT