Methanex would close by 2026 under ban on offshore exploration, MBIE says

Methanex has a bleak future under an offshore exploration ban plan. Photo / File

The country's largest user of gas in the manufacture of methanol faces a bleak future under the Government's ban on offshore exploration. A briefing paper from the Ministry of Business, Innovation and Employment, one of a number of documents on the oil and gas industry released today by Energy Minister Megan Woods' office, said Methanex would not be able to operate at full capacity from 2021 and would stop completely after 2026.

"Methanex will require a new discovery if it is to continue operating in New Zealand over the medium to long-term."

Methanex's managing director Dean Richardson declined to comment on the MBIE paper today.

Methanex last year had 270 staff in New Zealand, earning twice the average Taranaki wage, and about 100 contractors.

It contributed $640 million to the Taranaki economy, accounting for 8 per cent of the region's economy, and $834m to the national economy.

"Methanex is as dependent on producers of natural gas to supply it with sufficient gas at affordable prices, as producers of natural gas are dependent on Methanex to provide a major demand outlet with a flat demand profile," the paper said.

In April the Government announced a ban on future offshore oil and gas exploration in New Zealand.

More than 30 existing permits, 22 for offshore oil and gas exploration, are unaffected by the ban.

Woods said at the time that if those permits, which cover 100,000sq km were continued or taken up, exploration would continue for more than a decade.

The Government has announced a package of measures for the Taranaki region from its Provincial Growth Fund to soften the blow, and the Prime Minister and her ministers have visited the region to allay fears about the impact of the ban.

A lot of the document, including any conclusions and the scenarios the ministry was asked to advise on, has been redacted.

It said the direct contribution of the oil and gas sector to gross domestic product in 2013 was $1.7 billion, rising to $2.8b when added-value manufacturing was included.

"The Taranaki region benefits disproportionately from this economic contribution," the paper said.

The contribution has probably fallen since 2014 after oil prices fell. "The Taranaki region has been affected by this downturn, with the impact felt much more broadly than just the immediate oil and gas sector," the report said, citing money given to community groups, schools and the coastguard.

MBIE modelled oil and gas development scenarios on the impoverished East Coast of the North Island.

Small-scale industry would grow its gross disposable income to $160m and create 199 jobs. That would rise to $1.4b and 1163 on a large-scale.