Taranaki methanol plant closure disappointing but not unexpected, business leaders say

Wednesday, 24 February 2021

Taranaki politicians, business leaders, and the oil and gas sector have reacted with disappointment at Methanex NZ's decision to mothball the Waitara Valley methanol plant.

The Vancouver-based company announced on Wednesday it is preparing to lay off staff in Taranaki after being unable to secure sufficient gas supplies to keep the plant operating.

In an emailed statement, Methanex said it would maintain Waitara Valley in a safe condition and restart it, should gas become available.

Some activities at Waitara Valley, such as truck loading, would continue to supply the local market.

Taranaki Chamber of Commerce chief executive Arun Chaudhari​said the loss of jobs was sad for the workers and their families, and also for the company, which was facing challenging times.

“It is not something we haven't seen before as both Motonui and Waitara Valley have been mothballed before,” he said.

**READ MORE:

* Climate Change Commission sees 'no future' for methanol production in Taranaki

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* Low methanol price and reduced gas supply drive production cuts at Taranaki Methanex plants

* Methanex offering $100,000 base salaries as it sees longer-term certainty in natural gas

* Methanol exporter Methanex signs supply deal, securing future in Taranaki

**

Chaudhari said now there was less offshore exploration planned, there was not the same confidence that the plant would resume production.

Redundancy packages should help cushion the immediate effects of job losses, he said.

Taranaki-based contractors that rely on Methanex for work during maintenance shutdowns will be most affected, he said.

“There will be more job losses as the company restructures, which will add to growing unemployment in Taranaki.”

While its two methanol production plants at Motunui will continue to operate, Methanex has commenced an organisational review to reflect the lower production and is consulting with staff.

The company employs 275 people across sites at Motonui, Waitara Valley and Port Taranaki.

Permanent job losses are expected to result, as well as a lower need for contractors to support ongoing maintenance activities, the statement said.

New Plymouth Mayor Neil Holdom said the decision by one of the region's biggest employers was “really disappointing' and would have a 'massive impact on workers'.

“It was inevitable given our Government seems determined to end the oil and gas industry in New Zealand as soon as they can with increased coal use likely to make up much the shortfall in energy demand in the short to medium term,' he said in a statement.

“This is a reminder that Aotearoa’s transition to a lower emissions economy will be felt far more severely in Taranaki, and Government and our Prime Minister need to honour their commitment to supporting our region through multi-year investments to help our people and economy with a just transition over the next 10 to 20 years.”

Venture Taranaki chief executive Justine Gilliland​ said the decision would not have been made lightly.

“It highlights the importance of certainty of supply and future plans, given the crucial role natural gas can and should play in a just transition to a low-emissions future,' she said in a statement.

Petroleum Exploration and Production Association of New Zealand chief executive John Carnegie​ said Methanex's decision reinforced how important a long-term supply of natural gas was to the national economy and export industries.

“It’s concerning that a number of other major regional industries in New Zealand are also considering their future,” he said.

Methanol production from the three Taranaki plants amounted to three per cent of the world’s methanol market, and the business represents 10 per cent of the Taranaki economy, employing and supporting hundreds of staff and contractors.

New Plymouth MP Glen Bennett said he hoped the closure would be “a short-term issue.”

“This is a commercial decision made by Methanex,” he said in an emailed statement.

“I understand it has to do with the availability of gas in 2021, as there has been a decline in production from the Pohokura field, as well as Covid-19, which has caused some delays on new drilling by gas producers.”

Methanex NZ managing director Dean Richardson said it was a disappointing outcome 'as we expect methanol demand to rebound and grow as global economic activity recovers'.

“The growth is driven by methanol being a key building block used to produce countless everyday consumer and industrial products and the recognition globally that methanol provides environmental benefits as a fuel.”

Richardson said natural gas remained the cleanest viable feedstock to produce methanol on a commercial scale.

“The production lost from New Zealand is likely to be replaced by methanol made from coal, generating significantly higher emissions, which means higher global emissions of CO2 and lost jobs in Taranaki.

“Methanex is a significant buyer of natural gas in New Zealand, and we provide the gas and electricity markets with steady, long-term demand.

“This, in turn, gives suppliers confidence to look for and develop natural gas reserves that supply other parts of the economy, such as smaller industrials, commercial users, residential consumers and electricity generators.”

Richardson said gas would be needed in New Zealand to maintain energy security until other practical solutions are available.

Methanol demand is expected to grow as global economic activity recovers, he said.