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Methanex threatens to quit if Crown turns off the gas

By Graeme Hunt

Friday 28th March 2003

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The country's sixth-largest exporter, Methanex, warned yesterday it might quit New Zealand unless the government was able to guarantee it a long-term supply of natural gas.

The company, a subsidiary of the Canadian-based Methanex Corporation, is running at 40% capacity because of the Crown's decision to ration gas from the offshore Maui gasfield.

Methanex's $2 billion-plus operations here ­ plants in Waitara and Motunui, Taranaki ­ supply methanol to Asian clients and account, at full capacity, for 40% of the group's global production. But the New Zealand company said this week it could not continue indefinitely without a guaranteed supply of gas and in the absence of a major drilling programme for new fields.

Much depends on the outcome of a bitter legal battle with the government over the Maui natural gas contract and the redetermination of Maui gasfield ­ a field an independent expert claims could run out any time but which a Methanex expert says could meet the needs of existing contracts that expire in 2009.

Methanex New Zealand managing director Bruce Aitken would not discuss the court action except to say the experts had "come up with different numbers" on Maui gas' future.

"Our view is that the field will still be producing in 2009," he said.

"There is more gas in Maui ­ I have no doubt about it at all ­ but the contract has so many perverse drivers [in it that] we will not see more gas being produced from Maui."

Mr Aitken said he was concerned that only a handful of wells had been drilled in Taranaki in the past year despite the one-in-three likelihood of an explorer finding gas.

"The government could play a role in developing a PPP [public-private partnership] by treating a drilling rig as part of infrastructure."

The fall in methanol exports has had an impact on the New Plymouth's port, Westgate Port Taranaki, forcing it to diversify to stay profitable.

Methanex's departure would be devastating, hurting the province's heavy engineering companies, including Fitzroy Engineering Group, which handles much of Methanex's maintenance.

The consultancy Berl estimates Methanex New Zealand has a gross output of $1.4 billion and an added value of $480 million and provides 640 fulltime-equivalent jobs.

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