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The Methanex plant in the Waitara Valley.
photo: Google Maps
The country The current electricity supply crisis The role of Methanex, the largest natural gas user, which consumes 40% of the country’s gas supply, was highlighted.
The Taranaki methanol plant will shut until the end of October and sell its gas to Contact Energy and Genesis.
Like the Te Wai Point aluminium smelter in Southland, the methanol plant is a legacy of the “Think Big” programme, which used taxpayers’ money to build infrastructure and factories.
The Methanex plant uses Taranaki’s offshore gas fields to produce petrochemical methanol for export.
Energy experts and economists say New Zealand needs a plan in case Methanex exits, as gas supplies run low.
The company is so critical to energy markets that government reports typically produce two sets of forecasts: one if Methanex leaves and another if it stays.
The facilities are currently owned by a Canadian company that also produces methanol in China, Chile, the Middle East and other regions.
Brad Olsen, an economist at Infometrics, said Methanex facilities were never meant to operate forever, and if the plant reduces operations or closes, workers in the region will need a planned transition.
He said the company employed about 300 people, about 1 per cent of employment in the New Plymouth area.
“Methanex was never expected to last forever, and it certainly can’t. It’s hard to imagine a whole new sector of the economy bringing in a full percentage point of employment instantly, so planning will be very important.”
“There are real opportunities in Taranaki, particularly to add value to already strong economic sectors such as food and fibre.”
Methanex is one of the biggest beneficiaries under the New Zealand government’s free carbon credits scheme, which is designed to protect exporters from the adverse effects of New Zealand’s carbon price.
Alex Johnston from campaign group Common Grace Aotearoa said the money could be used to place workers in other jobs if the company left.
“Last year’s subsidy is now about $60 million, which is about $200,000 per Methanex employee. One or two years of this investment will provide a really strong transition support for these employees. Right now, it’s a huge per-employee subsidy to support a business that is essentially powered by fossil fuels.”
Methanex said that globally it is exploring low-carbon alternative fuels such as biogas.
But Johnston said there was no indication the company was seriously considering switching its New Zealand plants from fossil to non-fossil fuels.
Methanex would not comment on its decarbonisation plans in New Zealand or its future prospects.
A company spokesman said the company’s top priority was to safely shut down the factory and resume work smoothly in November.
Closing the plants would free up 40 percent of New Zealand’s gas supply, but would also cost gas suppliers their biggest customers, as well as supply contracts that underpin the development and maintenance of gas fields.
Suzi Kerr, an economist at the Environmental Defense Fund, which tracks oil and gas emissions, said the exit of Methanex would reduce New Zealand’s reliance on fossil fuels and free up energy supplies for other users.
“Methanex is an ambitious project that has been dependent on government support. It was built to meet a need that was there a long time ago. I don’t know if they will shut it down, but if they do and the gas is no longer needed, there are plenty of other options.”
The gas industry said Methanex’s departure from New Zealand would cause pain for other gas users because the company underwrote investments in gas fields that benefited all gas users.
An Ernst & Young report last year found that the Methanex closure would make natural gas more expensive and cause temporary shortages, hitting users who don’t yet have access to cleaner natural gas alternatives.
Not all energy experts agree.
Modelling built for the government by Concept Consulting shows that if Methanex leaves, onshore fields will have enough gas to supply remaining users, making it a cheaper option for the state than developing offshore gas.
From a GDP perspective, the Climate Change Committee found that pushing back the closure of Methanex by about 10 years to 2040 would not have much impact on the economy.
However Mr Olsen said without a jobs transformation plan the closure would be a big deal for Taranaki.
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