Methanex closure to have ripple effect across the region

New Zealand's largest gas user Methanex is to effectively close its plant and sell off its gas contracts.Methanex said a lack of natural gas and a clear pathway to new supplies meant operations in New Zealand were no longer sustainable.The Canadian-owned company said it had now entered into an agreement to sell all of its New Zealand natural gas contractual entitlements, commencing in the first quarter of next year.It said it then planned to safely idle and preserve the facility for long-term optionality, should future circumstances support a restart of operations.The company has in the past been responsible for taking around 30 to 40 percent of all of New Zealand's natural gas production.ln recent years the country's natural gas production has declined rapidly with little new supply coming on board.The company, which employs around 200 people, not including contractors and suppliers, said it would work closely with employees, contractors, suppliers, customers, and government stakeholders during the transition period.Rich Sumner, president and chief executive of Methanex Corporation, said the company had been preparing for this eventuality, given declining gas availability in the country.Sumner said the company was now focused on supporting its team members during the transition period, and safely operating the plant over the next several months.New Plymouth Mayor Max Brough said the announcement was disappointing but not unexpected."They've got no continuity of supply. They don't have enough gas coming and they're making the best of a bad situation."They recognise New Zealand has a gas shortage. This will free it [gas] up for other users, but the price will go up. You need a baseline consumer to keep the price down for others because make no mistake, they've subsidised New Zealand's gas at a retail level and for other users for decades."He said many people who would lose their jobs as a result of the closure would struggle to find similar work."There's no alternative here for those roles."They will be heading to where [they can] support their families, and it probably won't be in New Zealand. So that's very disappointing."But he was optimistic about other gas exploration projects in the city."I've rolled out the red carpet and the welcome mat actually, because New Zealand needs gas."Whatever your political persuasion is, the reality is, we still need gas to power industry in a lot of places in this country and earn export dollars."The Taranaki Chamber of Commerce said the decision of Methanex to mothball its Motunui plant would have a widespread impact on the local economy.Chamber chief executive Arun Chaudhari said while the move was not unexpected, it would have a ripple effect across the region."They'll be impacts across almost every sector as we've known it."Methanex obviously employ a lot of people, so we're going to have unemployment to some extent."Obviously, the hospitality industry, the visitor industry will all get affected by a huge employer like Methanex leaving the region."Chaudhari said a silver lining was that the plant was being put into hibernation rather than completely decommissioned."The good thing is that they are idling the plant which means there is some hope that if there is gas that can be used commercially to manufacture methanol again that is what will happen."Chaudhari believed the decision gave people a clearer picture of the road ahead."The positive side of it is that there is more gas that can be used by Genesis and it means we have more energy security when we cannot rely on renewable energy in times of no sun, no wide and low lake levels."He was optimistic new gas exploration permits would uncover gas supplies significant enough to allow Methanex to be rebooted.Port Taranaki said it was "saddened" that Methanex - its single largest customer - was closing its New Zealand operations.Chief executive Simon Craddock said the Canadian-owned company had been a long-time and important customer of Port Taranaki and a key contributor to the Taranaki economy."With the challenges in the gas sector, we have been preparing our business for this decision to ensure we remain sustainable in the long term."We are saddened to see their New Zealand operations close, and thank Methanex for their decades-long commitment to our business and the region.Craddock said his thoughts were with the Methanex team and their families as they navigated this challenging period.Minister blames LabourEnergy Minister Simeon Brown said the former Labour government was at fault."The reason why we're in this position is because Labour decided to ban oil and gas exploration, crashed a sector, thousands of jobs in our regions lost, particularly in Taranaki, and today even more being lost."Labour leader Chris Hipkins denied there was any link."New Zealand hasn't had a significant find of new natural gas for over 20 years, the oil and gas ban didn't change that reality," he said."People were out there looking for gas, they couldn't find it. That's the reason why Methanex have made this decision."Ditch LNG import facility - GreensGreens co-leader Chlöe SwarbrickRNZ / REECE BAKERThe Green Party said the closure left the government no reason to push on with its plans to build a liquified natural gas (LNG) import facility.The government has set out to build the $1 billion terminal, saying it is necessary to shore up energy supply."Methanex leaving takes the country's largest gas user out of the market and frees up gas supply through to the end of the decade for electricity generation," said co-leader Chlöe Swarbrick."The 'gas shortage' the government has been talking up to try and justify this fossil fuel project is now about to be a great deal smaller."Swarbrick said if the government did not cancel its plans, it should at least return to the drawing board before signing a deal.Brown said the government would push on because it was still necessary."Some of that gas will become available to the electricity sector, but it's not going to be enough in the long term," he said."We still have a significant lack of backup energy."Finance Minister Nicola Willis said the government had factored in the likely closure of Methanex when it planned for the LNG import terminal."Therefore we accounted for the additional gas that would come into the market if that closure occurred," she said."Even with that additional gas coming into the market, we would still face a dry year risk, a shortage of gas in years when there isn't enough water in the hydro lakes."Meanwhile, Genesis Energy said it had secured additional gas supplies from a third party for the period of March 2027 and 2029.It has not said who it got it off. It was 11.4 Petajoules (or PJ), about 10 percent of national gas production.In addition, Genesis said it had exercised its right of first refusal in respect of the Kupe gas supply, securing access to up to 8.6 PJ.It said that meant it had enough gas to meet forecast retail demand and support the transition away from baseload gas generation.