Methanex shut down one of the two trains at the 1.8 million-tonne capacity Motunui plant in recent months in response to the downgrading of its principal NZ gas supply, Maui, and the subsequent ruling it had taken over 77 petajoules more than its share.
The world's largest producer of methanol yesterday confirmed that the project was no longer financially viable because of a US$50 million blow out in capital costs due to rises in the value of the Australian and euro currencies against the US dollar.
The Methanex decision dealt another blow to the WA Government's dream of turning the Burrup Peninsula into an industrial powerhouse.
"For Methanex, the capital costs for a greenfield project of this size have become disproportionately high. Northwest Australia remains an attractive location to build a methanol plant and we are evaluating several alternatives including installing capacity in smaller increments that would be more manageable from a cost perspective," said Methanex senior vice president, Bruce Aitken.
"Our Asian customers are very important to us and we are committed to maintaining our position in Asia."
Aitken said the strengthening Australian dollar has added about $US50 million to the cost of the project in the past two months. Economic modelling by the company used an exchange rate assumption of $US55c. However, the Australia dollar's perception as a safe currency has seen it climbed to high as US61c in recent days. Yesterday it closed at US59c.
The latest announcement comes just five months after Syntroleum Corporation decided to scrap plans to build a $1 billion gas-to-liquids plant because it could not the raise the necessary funds.
Of the six projects worth a collected $5 billion that were on the drawing board six months ago, only Burrup Fertilisers' $630 million liquid ammonia project has cleared all hurdles. Of the remaining $3 billion worth of projects, only the London-based GTL Resources is close to financial close on its gas-to-liquids project.
The other remaining projects planned for Burrup includes a $770 million methanol plant proposed by London-based Liquigaz, the $1.2 billion Dampier Nitrogen project as well as $1 billion dimethylether plant proposed by Japan DME.
Company president Pierre Choquette added that Methanex commitment to the methanol industry was evident in the significant projects already underway.
The 1.7 million tonne Atlas methanol project Methanex and partner BP were constructing in Trinidad was scheduled for completion early next year. And work had already commenced on the 840,000 tonne expansion at the low-cost (about $US75cents per Gigajoule) methanol production hub in Chile.
"We expect to complete the Chile expansion in early 2005. Methanex is focused on establishing a production hub in the Asia Pacific region and Australia is still the preferred location for a new supply source," Choquette added.
Aitken was not available for further comment today. However, EnergyReview.Net understands the reference to "including installing capacity in smaller increments" means Methanex now plans to progressively dismantle its two-train, 1.8 million-tonne capacity, Motunui complex in New Zealand for subsequent shipping to and reassembling in Western Australia once suitable long-term gas supply contracts have been concluded. Methanex decided as long ago as 1995 that the Motunui plants were relocatable.
The Netherland Sewell Associates International final report concluded there was only 370 petajoules of Maui gas remaining at the current contract price and that Methanex had used virtually all its entitlements.
If the Methanex decides to proceed with this relocation, then it will be very unlikely replacement production capacity will ever be re-established in Taranaki, though the smaller 520,000-tonne Waitara Valley plant could be kept going for several years with non-Maui gas, that is, gas from the Kapuni, McKee, Mangahewa and perhaps other small onshore fields.
It is further understood Methanex has already restarted the expensive and older Kitimat and Medicine Hat plants in North America to cover for the anticipated 1.2 million tonnes of lost production from New Zealand this year.
