Iron ore miner Fortescue says the construction of a new $178 million gas pipeline to its Pilbara operations, will reduce operating costs and open up long-term growth opportunities.

Fortescue has signed a long-term gas transportation agreement that will see gas delivered via the existing Dampier to Bunbury National Gas Pipeline and a new 270km Fortescue River Gas Pipeline to the power station at Fortescue’s Solomon Hub.

The Fortescue River pipeline will be built through a joint venture between Duet Group subsidiary DBP Development Group and TEC Pilbara, which is owned by TransAlta corporation, the owner-operator of the Solomon Power station.

Fortescue chief executive Nev Power said the pipeline would allow the Solomon Power Station to be converted from diesel to natural gas, saving the company $20 million a year.

“The pipeline to Solomon allows Fortescue to reduce operating costs and play a significant role in cutting emissions by switching stationary power generation from diesel to clean natural gas.”

Fortescue said the new pipeline had the potential to open up long-term growth opportunities across the Pilbara.

Duet Group on Thursday said construction of the pipeline would cost an estimated $178 million and is expected to be completed by the end of 2014.

Shares in the energy infrastructure business have been placed in a trading halt while it carries out a $100 million institutional bookbuild to cover its share of the construction costs.

Engineering Group Monadelphous has won a $100 million contract for construction work on the pipeline.

Meanwhile, ratings agency Moody’s has lifted Fortescue’s corporate credit rating in light of the iron ore miner’s early pay back of $1.6 billion in debt.

Moody’s lifted the company’s corporate family rating from Ba2 to BA1, which is one notch below investment grade.

Its senior secured debt remains stable at Baa3, which is at the bottom of the investment grade spectrum.