PAPUA New Guinea's gas and hydro-electricity potential has been plugged in to the ambitious growth plans of newly created Russian aluminium giant United Company RUSAL.
UC RUSAL recently became the world's biggest aluminium group when it leapfrogged its Western competitors in what was a three-way merger of RUSAL, controlled by Russian oligarch Oleg Deripaska, its Russian rival, SUAL, and the aluminium arm of Swiss-based commodities trader Glencore.
Youthful Alexander Bulygin — he was born in 1968, making him 10 years younger than BHP Billiton's Chip Goodyear — is chief executive of the new aluminium powerhouse.
In an interview with BusinessDay, Mr Bulygin said energy availability (electricity accounts for 30 per cent of aluminium production costs) was by far the most crucial factor for the development of the industry. That is why PNG's abundant gas and hydro-electricity potential is on the group's radar.
"Our company will be keen to continue exploring the opportunities for aluminium smelting in PNG, based on its energy resources in gas and hydro," Mr Bulygin said. "We have a memorandum of understanding with the Government of PNG and, on the basis of our discussions with the Government and the major stakeholders in the country's energy resources, we are assessing a pre-feasibility study of both power generation and smelting."
Securing global energy capacity, whether it be in PNG or elsewhere, is central to UC RUSAL's growth plans beyond aluminium production.
"While leading the way for the aluminium sector, we intend to diversify our business, turning into an energy and metals corporation," Mr Bulygin said.
"We are now self-sufficient in raw materials. We are securing access to power resources. This is a good platform to build a global corporation excelling in a variety of mining and metal sectors."
His comments would resonate with Alcoa, which wants to expand the Portland aluminium smelter in western Victoria but has not yet secured a power deal with the State Government.
That is a position that UC RUSAL plans to avoid as it pursues global growth opportunities by "embracing both aluminium smelters and power generating assets".
"That's why the key factor in choosing an investment region is a potential for the establishment of energy-generating capacity as the basis for developing the aluminium industry and related projects," Mr Bulygin said.
It is also a strategy deployed by UC RUSAL in Queensland, where it owns a 20 per cent stake in Queensland Alumina Ltd's Gladstone refinery.
"We are currently considering a number of investment opportunities that will ensure strengthening of our presence in the country," Mr Bulygin said of the group's Australian ambitions.
"There is potential to expand the QAL capacity by at least 1 million tonnes (it would cost more than $1 billion). QAL offers UC RUSAL a significant opportunity, and we are keen to participate with our partners in any expansion. But this, of course, depends on market conditions and construction costs meeting the joint venture's criteria for return on investment."
He said UC RUSAL was still engaged with the Queensland Government, through a joint working group, in exploring the best options available for long-term power supply in the state.
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