Methanex, the country’s only methanol manufacturer, says it has struck a deal to sell all of its natural gas contractural entitlements and expects to “indefinitely idle” its production facilities in Taranaki.
Methanol is a clear liquid chemical used in products like plastics, paints, cosmetics and fuels. On its website, Methanex said approximately 95% of its production in New Zealand is exported to customers in the Asia-Pacific region. The company is also NZ's largest user of natural gas.
“Given the continued decline in domestic natural gas availability and the lack of a clear pathway to meaningful new supply, Methanex has determined that continued operations in New Zealand are not sustainable and as such has taken steps to optimise value from its remaining New Zealand gas position," Methanex said on Wednesday.
“As a result of this agreement, the Company expects to indefinitely idle its New Zealand production facilities during the first quarter of 2027 and will work closely with employees, contractors, suppliers, customers and government stakeholders during this transition period.”
On the company’s natural gas contractual entitlements, it said it had entered into an agreement to “sell substantially all” of these commencing in the first quarter of 2027, continuing through the end of the decade when entitlements expire.
Methanex president and chief executive Rich Sumner said its NZ production facilities had operated for more than four decades and its people had made “significant contributions” to the company and NZ’s energy sector.
“However, we have also been preparing for the eventuality of this day given the declining gas availability in the country,” Sumner said.
“For several years we have actively contributed to managing New Zealand’s declining gas environment by matching our operating rates to available supply and, when appropriate, selling gas into the New Zealand energy markets.
“We are now focused on supporting our team members during this transition period, safely operating the plant over the next several months and then safely idling and preserving the facility for long-term optionality should future circumstances support a restart of operations.”
The company did not expect to incur material cash costs as a result of this decision.
LNG plans back in the spotlight, National blames Labour
Speaking to reporters on Wednesday afternoon, Energy Minister Simeon Brown said: "This is devastating news for Taranaki but this is exactly what Labour planned for when they decided to ban oil and gas in New Zealand."
Brown, who is also National's campaign chair, said some of gas will become available to the electricity sector.
"But it's not going to be enough in the long term because ultimately, the decline that is happening because Labour banned oil and gas exploration is having a huge impact on our energy sector in New Zealand, and that's why we're continuing with our plans for an LNG (liquefied natural gas) importation terminal."
The Government first announced its plans for an LNG import facility in February.
Labour leader Chris Hipkins said NZ hasn't had a significant find of new natural gas for over 20 years.
"The oil and gas ban didn't change that reality. It was only in place for a couple of years at that time. There were people out there looking for gas, they couldn't find it. That's why Methanex have made this decision."
He said the LNG import terminal "never stacked up" and the Government "should admit that they've got this wrong and not throw potentially billions of dollars at a project that will be a failure".
The Green Party said with Methanex leaving, this “shuts the door on any arguable reason for the Government to build an LNG import terminal” and called for these plans to be cancelled.
"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,” Green Party co-leader Chlöe Swarbrick said.
"If they're not going to do the rational thing and cancel their plans, at the very least, [Christopher] Luxon must return to the drawing board before signing any daft deal."
"New Zealanders deserve real energy independence, cheaper bills, local manufacturing and jobs and a resilient economy. An LNG terminal was never going to deliver that, and today's news makes that reality even more stark," Swarbrick said.
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