August 14, 2008

Methanex Set to Restart Motunui Methanol Plant

By WEIR, James

METHANEX is restarting its Motunui methanol plant in Taranaki later this month, with revenues put at up to NZ$650 million, but it may hasten a predicted national gas supply gap, expected about 2015.

The plant should produce about 900,000 tonnes of methanol, using 34 petajoules of gas a year, with supplies lined up till the end of next year.

Methanex is hoping to get more gas to run the plant till mid- 2010 and could also reopen its Waitara Valley plant next year if it can get gas at the right price. The Waitara plant, which produces 500,000 tonnes a year, will be shut down a few weeks after Motunui is up and running.

The Motunui plant is expected to be highly profitable for Canada's Methanex. Revenues would dwarf the estimated $200 million a year cost of gas and the $70 million cost of restarting the plant.

Methanex NZ managing director Harvey Weake said he was "optimistic about New Zealand gas".

There was also a growing demand for methanol to be used in transport in China. "Those markets are really booming so while that demand is there, we would like to be able to start the Waitara Valley plant next year, provided we can reach commercial terms (for gas)," he said yesterday.

Methanex runs the plants in New Zealand when it can get enough gas at the right price and for the right length of time.

If both Motunui and the Waitara Valley plants were running, Methanex would need more than 50PJ of gas -- equal to about a third of New Zealand's present national demand.

McDouall Stuart's head of research, John Kidd, said there was plenty of gas available in the short term, but the gap between the national supply and demand for gas would start appearing about 2015.

The "gas gap" could appear about 2011 to 2012, he said, if Motunui alone was running, but sooner if both Motunui and Waitara Valley were running during the next five years, using a combined 54 PJ of gas.

To be standing still in terms of gas reserves in five years time, the country would need to find another 350PJ of gas, if both Methanex plants were running at full capacity. The underlying demand for gas in New Zealand is about 150PJ a year.

At present methanol prices are high at about US$400 to US$500 a tonne compared with US$150 when the Motunui plant was shut down in 2004 because it could not get enough gas at a competitive price when methanol prices were low.

Methanex has spent about $70 million doing the plant up, giving it an expected five-year life. Gas may cost between $6 to $7 a gigajoule, and 34PJ a year would cost about $200 million, Mr Kidd estimated.

Methanex has not said where the gas will come from, but some may come from the Pohokura field which is effectively next door to the plant in Taranaki.

There may also be some gas available from Maui, from companies who have entitlements to more than they need.

The methanol produced each year could be worth up to NZ$650 million.

"There is a lot of (profit) margin, it would be a very economic decision," Mr Kidd said.


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