Methanex pulled out of its project yesterday citing rising capital costs as the main reason although the State government has pointed the finger of blame firmly at the Commonwealth and its protracted delays in coming through with promised financial support.

The Commonwealth offered $85 million to Methanex for its original $2 billion Burrup plant proposal, which would have created 1000 jobs during construction and 100 to operate. But when rising capital costs caused the company to scale back the project earlier this year, it had to resubmit its request for support.

Now of the eight major projects slated for the Burrup in the past two years three have fallen over, one is in serious doubt, one is edging forward and two remain in the early stages.

Only one, the $645 million Indian-backed Burrup Fertilisers, is under construction and on track for completion in July 2005.

Several hundred million dollars has been spent in developing suitable infrastructure on the peninsula, which has been promoted as a prime location for petrochemical processing projects due to its proximity to Australia's largest gas fields.

But the projects have faced delays in the approvals process, land access issues, debate been State and Federal governments over infrastructure funding, tax treatment for major projects, cost of construction labour and most recently the appreciating Australian dollar.

WA now faces stiff competition from alternative locations in South-East Asia and the Middle East, while the Methanex collapse will be greeted with relief from the company's New Zealand operations, which faced severe cutbacks following the development of the Australian operation.

Burrup Fertilisers project, which will produce 760,000 tonnes a year of liquid fertilisers for the South-East Asian market, is thought to be 40% complete, while two Japanese-backed projects to produce the aerosol propellant dimethyl-ether remain in the very early stages.