Key Highlights

•  The five-year agreement covers 55 petajoules of natural gas, with deliveries scheduled to begin on 1 January 2028.

•  The deal extends a long-standing Supply relationship and is intended to support processing at the Worsley alumina refinery.

•  Financial terms were not disclosed, and the announcement did not identify which fields will supply the gas.

South32 (ASX:S32) has signed a five-year agreement with Chevron for the supply of Natural Gas to its Worsley Alumina operation in Western Australia. The contract covers 55 petajoules of gas, with deliveries scheduled to begin on 1 January 2028. Financial terms were not disclosed, and the announcement did not identify which fields would supply the gas.

The agreement

The deal extends a long-standing supply relationship between the two companies and is intended to support mineral processing at Worsley's alumina refinery. Over five years, 55 petajoules equates to an average of about 11 petajoules a year, although the delivery profile was not detailed.

Chevron Australia President Balaji Krishnamurthy said natural gas would continue to play "a vital role in providing reliable energy" as the state's energy system evolves. He presented the contract as evidence of the ongoing role of domestic gas in supporting Western Australian industry.

About Worsley Alumina

Worsley comprises an open-pit bauxite mine near Boddington and an alumina refinery near Collie in the state's South West. South32's share of production in FY2026 was 3.72 million tonnes of alumina.

Alumina refining is energy intensive, requiring large volumes of heat and steam to process bauxite. Worsley's refinery currently uses a mix of coal, biomass and natural gas. South32 has converted two of its three coal-fired boilers to gas and is assessing whether to convert the third. Switching from coal to gas generally lowers emissions intensity, which is relevant as Australian industry faces tightening emissions obligations.

Sale to Alcoa

The timing of the deal is notable because South32 is in the process of selling its 86% interest in Worsley to Alcoa. South32 shareholders approved the sale on 15 October 2026, and completion is expected in the first half of 2027, subject to regulatory approvals and other conditions. South32 continues to own and operate the asset until the transaction closes.

Because gas deliveries do not start until January 2028, the contract is likely to be most relevant to Worsley under its next owner, assuming the sale completes as planned. Securing long-term energy supply ahead of a change in ownership may help support continuity of operations through the transition. The announcement did not say how the contract will be treated on completion of the sale.

South32's broader shift

The divestment, now formally shareholder-approved, forms part of South32's repositioning towards copper and other base metals. Excluding aluminium, copper accounted for more than half of the company's FY26 earnings. Exiting Worsley would reduce South32's exposure to the alumina market and to the energy costs that weigh heavily on refinery margins.

Western Australia reserves a portion of its gas production for domestic use, and large industrial users have sought to lock in supply as older contracts expire. A five-year commitment beginning in 2028 gives the refinery visibility over a key input cost, while Chevron gains a long-term domestic customer. Supply certainty also matters for any further boiler conversions, since moving away from coal depends on having enough gas contracted to replace it. For South32, the agreement may also help reduce uncertainty for the buyer during the sale process.

Risks and considerations

Without disclosed pricing, it is not possible to assess how the contract affects Worsley's cost base. The sale to Alcoa remains subject to conditions, and any delay would leave South32 operating the refinery for longer. Decisions on converting the final coal boiler, and the broader pace of decarbonisation at the refinery, will also influence future gas Demand at the site, as will refinery throughput and any operating changes made by a new owner. Next steps for South32 include completion of the Alcoa transaction and any further update on the remaining boiler conversion.