(Adds company comment and background.)     By Alex Wilson and Bill Lindsay    Of DOW JONES NEWSWIRES  

MELBOURNE -(Dow Jones)- Apache Corp. (NYSE:APA) (APA) said Monday it will take until the end of the year to restore full production from its Varanus Island gas plant off the coast of Western Australia state in the wake of a fire which has crimped output and affected industrial gas users across the state.

Varanus Island, which supplies about a third of Western Australia's gas, has been shut down since a fire and explosion on June 3 and Apache had previously said it was expected to return to partial gas supplies within a couple of months.

The plant is made up of two separate joint ventures - East Spar and Harriet - and Tim Wall, managing director of Apache's Australian operations, said the East Spar processing facilities had not been as badly damaged as Harriet's facilities and should be back in action by August 15.

This would take output to 200 terajoules a day, or 60% of total production, and Wall said the remainder of gas production from Harriet is expected to be back on line in December, when Apache hopes to ramp back up to normal production of 350 terajoules a day.

Most of the gas from Varanus Island is sold to industrial customers and Western Australia's booming mining industry has been hit hard by the gas outage, with many being forced to pay a big premium for diesel to power their operations.

Australian Prime Minister Kevin Rudd and Treasurer Wayne Swan have said the impact of the disruption will be "huge" and will flow through to the national economy.

Wall said at East Spar export pipelines, valves, compressors, instrumentation and control facilities were being repaired.

At the worse hit Harriet facility, three sales gas compressors, the hot oil system, control system and flare stacks were damaged and Apache was still assessing the damage to processing vessels.

"I've been with Apache 18 years and this is the first time that Apache worldwide has experienced such an incident," Wall told reporters.

"I can assure all stakeholders that we will not take a minute longer than necessary to restore gas safely to (Western Australia)."

Wall said the cause of the explosion is not yet clear and Apache is cooperating fully with the Department of Industry and Resources and the National Offshore Petroleum Safety Authority with their inquiries into the explosion.

The cost of repairing the damage will not be known until more work has been done, Wall said.

Australia's Santos Ltd. (Australia:STO) (STO.AU) has a 45% stake in the John Brookes field, which feeds the East Spar facility, and Tap Oil Ltd. (Australia:TAP) (TAP.AU) has a 12.2% stake in the Harriet field.

-By Alex Wilson, Dow Jones Newswires; 61-3-9671-4313; alex.wilson@dowjones.com

    (END) Dow Jones Newswires   06-23-08 0433   Copyright (c) 2008 Dow Jones & Company, Inc.