High gas prices lead to axeing of methanol plant

Vancouver-based Methanex -- whose New Zealand company has made no decision yet on whether it will continue its methanol production in Taranaki next year -- says it will close its plant at Kitimat in British Columbia.

Methanex Corp has decided to close its Kitimat methanol plant in early 2006, laying off 127 workers, a Montreal radio station, CJAD reports.

Methanex blamed the high cost of its North American natural gas feedstock, the radio station said on its website.

Methanex chief executive Bruce Aitken said the high price for natural gas meant the BC methanol plant was no longer economically viable.

"While Kitimat is an ideal location to supply our customers in North America and Asia, it is exposed to high cost North American natural gas, which is the main feedstock for this 500,000 tonne per year methanol plant," he said.

The North American price for natural gas, a key input in the production of methanol, has nearly doubled in the past year. Natural gas for October delivery traded at US$11.659 ($17.12) per 28.32 cubic metres on Tuesday, an increase of US52c.

The Vancouver company is the world's largest producer of methanol, an industrial chemical used in everything from petrol additives to paint, sealants and windshield-washer fluids.

The company, formerly controlled by Nova Chemicals Corp, generated revenues of US$1.7 billion last year and employed 888 people at the end of 2004.

Methanex's other production hubs are located in Chile and Trinidad where low-cost natural gas is bought under long-term supply agreements, and Methanex also produces methanol in Taranaki.

But Methanex New Zealand Ltd has already shut down it Motonui plant, and its managing director Harvey Weake has said no decision has been made year whether Waitara Valley will operate in 2006.

At present Waitara Valley is operating at near-full capacity and is expected to manufacture 400,000 tonnes of methanol this year.

In May, Mr Weake said that changes in New Zealand's gas supply and demand balance over the past three years meant the price of gas had risen, and as a consequence Methanex NZ had switched from being a large methanol producer to a small one.

- NZPA