Cheap gas keeps methanol plant operating - for now

A new gas supply to Methanex's Waitara Valley methanol plant will raise production to 230,000 tonnes this year.

President Bruce Aitken said yesterday that the plant, which can make about 530,000 tonnes annually of the chemical used to make solvents, paint and gasoline additives, was restarted in January after being idled last year because of a shortage of cheap gas.

Intended to run for only about two months, Waitara Valley will now operate until the end of June after the company sourced another 170 million cubic metres of gas.

Aitken said the plant would supply Asia-Pacific region customers and was expected to make a positive contribution to earnings and cashflows in the first half.

Methanex has started new plants in Latin America and Trinidad in the past two years after rising natural gas prices made plants in North America and New Zealand uneconomic. It is planning to build a 1.3 million tonne-a-year plant in Egypt where gas supplies are cheaper.

Methanol is selling for about US$330 ($507) a tonne in the Asia-Pacific region, up about 13 per cent in the past year.

Aitken said supplies were tight, demand was good and inventories low. While Waitara Valley was a flexible production asset, production beyond mid-2006 depended on finding more cheap gas.

Methanex's two New Zealand plants accounted for 40 per cent of its global output in 2002. It mothballed the larger Motunui plant late in 2004 after supplies of gas from the Maui field dwindled.

- BLOOMBERG