Methanex move spurs calls for quick fix to energy crisis
Wednesday, 14 August 2024
It’s one of Taranaki’s biggest employers and exporters, but for the next three months Methanex will be making more money doing nothing as it sells its gas to power companies to help ease the energy crisis.
The Canadian-owned business announced on Tuesday it would idle its Motunui facilities for 2½ months, starting immediately.
Instead of making methanol, which it exports from Port Taranaki, it would sell the gas it used for that process to Contact Energy and Genesis Energy so they can use it to generate electricity – which, like gas, is in short supply.
Those two companies would get 3.5 petajoules and 3.2PJ respectively.
This is not the first time Methanex has supplied natural gas to power companies over winter. In 2021, it temporarily reduced production to supply between 3.4PJ and 4.4PJ to Genesis Energy.
Methanex New Zealand employs about 300 staff and contractors at its facilities in Taranaki and last year produced $623 million of methanol, the vast bulk of which was exported through Port Taranaki.
It had been operating at only about half of its capacity since March.
It is not yet known if the decision to idle its plant will result in job losses.
However, the company said it expected to earn more from the arrangement than it would lose in methanol income.
New Plymouth mayor Neil Holdom said the move was another clear sign the country needed a bipartisan long-term energy strategy agreed by all major parties and developed with the energy sector.
“I’m really interested in what the leader of the Opposition has to say about our national energy policy and strategy and whether Labour are prepared to put party political objectives to the side and focus on working with the coalition Government to develop a long-term energy strategy that works for all New Zealanders,” he said.
“The alternative being more manufacturers closing, job losses and the loss of export earnings that accompany that.”
Port Taranaki chief executive Simon Craddock echoed Holdom’s sentiment.
He said there needed to be a quick solution to the energy shortage to ensure energy security and resilience.
This would enable the country’s key export earners, such as Methanex, to return to previous higher production levels, he said.
“While this announcement is disappointing and will impact overall trade volumes through the port and our revenue, we recognise that this decision has been borne out of necessity, through a combination of a dry year for electricity generation and the decline in gas reserves.”
Taranaki Chamber of Commerce chief executive Arun Chaudhari applauded the move by Methanex as being good for the country.
That was because of the downward impact it would have on electricity prices while also ensuring there was supply for hospitals, factories and critical services.
He said Methanex was an important part of the Taranaki regional economy as well as the national economy. The volume of gas it used in effect subsidised the price for domestic gas users, he said.
“If we didn’t have such a large consumer of natural gas, we would be paying skyrocketing prices for gas already.”
Contact Energy said the 3.5PJ of gas it would receive from Methanex would allow it to run its Taranaki Combined Cycle gas-fired power station through the remainder of the year “if required by the market”.
“With national hydro storage levels at just 46% of the average for this time of year, and an ongoing decline in domestic gas production, we have taken this step to support security of electricity supply to New Zealanders,” Contact chief executive Mike Fuge said.
Genesis Energy said it would get up to 3.2PJ of gas, allowing the Huntly Power Station’s Unit 5 turbine – the largest turbine on-site – to return to full capacity “for the first time this winter”.