The Methanex board yesterday announced the corporation would not be proceeding with the construction of the 1.3 million tonne Western Australia project as capital costs had escalated to an unacceptable level. Chairman Pierre Choquette said Methanex had been unable to develop a project that delivered any more than marginal returns for shareholders.
Initial industry reaction in New Zealand, where the Methanex plants had until this year supplied up to 2.3 million tonnes of methanol a year into Asia-Pacific, was to wonder how on earth Methanex could keep supplying that region with no Aussie plant and drastically reduced Kiwi production.
Commentators said the terribly tight New Zealand natural gas market and the no-go for Burrup put Methanex in an almost perilous position, even with its Trinidad acquisition and planned Trinidad and Chilean expansions. The extra 2.55 million tonnes from Trinidad will go primarily to North America and the additional 840,000 tonnes from Chile will not be available until 2005.
However, today Aitken told EnergyReview.Net from Vancouver that was not the case and that Methanex could "comfortably manage" its current commitments for some years, supplying its Asian customers from New Zealand, Chile and Kitimat in Canada.
However, he admitted the lack of long-term economic gas in New Zealand was a significant issue and that Methanex needed to find a long-term supply solution for Asia.
Methanex was currently shipping about 1 million tonnes from Chile into Asia and that the Kitimat plant had a capacity of 500,000 tonnes. Asked from where Methanex would make up the 800,000 tonne shortfall, Aitken said he remained confident his New Zealand plants would be producing between 500,000 and one million tonnes of methanol next year.
This was despite having no contracted Maui gas and all non-Maui contracts coming up for renewal. NGC's "Kapuni" gas contract expires early 2004 and last week Todd Energy said it was to tender up to 100 Petajoules of McKee and Mangahewa gas, virtually all the estimated recoverable gas from both fields.
Rumours are that Todd will be hoping for $NZ5-plus per Gigajoule for the gas, certainly for the next three years until the similarly priced Pohokura gas field comes onstream. This could effectively shut Methanex out of any bidding process as it cannot compete with electricity generators prepared to pay higher prices.
Aitken conceded this was possible and said one of the biggest issues for the Kiwi gas market was a lack of transparency and that no gas was traded or prices reported on a daily basis, as in the US or Australia.
"Hopefully New Zealand will gravitate towards being a real market but in the meantime there isn't much basis for suggesting what price gas should be.
"I am sure that if we have another dry winter and power prices are high then the electricity companies will be prepared to pay quite high prices for gas. On the other hand, if electricity prices are low then I am sure that they will not have much appetite for high gas prices. There are no easy answers."
He said Methanex continued working on several confidential options to secure gas for 2004, but conceded the corporation would be reviewing the size of its New Zealand operations and staffing levels year-by-year. Methanex recently said up to 40 of its 220 Kiwi staff could go by the end of this year.
