INTERVIEW-Limited gas holds back Sohar Aluminium's expansion

* Limited gas supplies holds up Sohar's expansion plans

* Gas imports from Abu Dhabi could be an option

By Amena Bakr

DUBAI, March 11 (Reuters) - Oman's Sohar Aluminium, part-owned by a unit of global miner Rio Tinto  , sees gas shortages as the main obstacle to further expansion, a top executive said.

Sohar Aluminium, a $2.4 billion joint venture located in Oman's Sohar industrial port, completed the first phase of the project in February last year and is operating at full capacity of 360,000 tonnes per year (tpy). 

The company had plans for a second phase which would add another 360,000 tpy but the project had been put on hold due to limited gas supplies, Sohar Aluminium Chief Executive, Bruce Hall told Reuters in a telephone interview.

"We aspire to build phase two, but there is no formal time frame and the main reason is current gas availability," he said.

The non-OPEC oil exporter needs to increase gas supplies by 48 percent to 7.2 billion cubic metres (254.3 billion cu ft) a year by 2013 to fuel power and desalination plants, the Oman Power & Water Procurement Company said in 2008.

Gas demand is 13.6 million cubic metres per day (cmpd) and will increase to 20 million cmpd by 2015, it added.

Government test drilling in the gulf state has yielded positive results for oil and gas, said Hall, but "we still don't know how much of these reserves are available, and if they are available."

"It's still not a slam dunk because we will be competing with other companies that produce methanol, urea and LNG who also need gas."

Importing gas though the United Arab Emirate's (UAE) Dolphin Energy pipeline which pumps gas from Qatar could be an option for Sohar, however the additional costs must be considered, said Hall.

"The process is technically possible, but there are economic and political issues to be considered." 

Financing the expansion will not be an issue as the firm has already proven profitable, he added. He declined estimate the cost of phase two.

"We have already started distributing profits to shareholders...and now we have to prove to the government that our project will contribute most to Oman's economy."

Hall declined to say where Sohar exports its aluminium, only citing China and India as large demand markets.

Sohar Aluminium is a joint venture between the Oman Oil Company, the Abu Dhabi Water and Electricity Authority (ADWEA) and Rio Tinto Alcan, a unit of Rio Tinto.

(Editing by Jon Boyle)