[sMethanex uses 40 percent of the country’s gas supply. NZ needs a plan in case it leaves, experts say.
The Methanex plant in Waitara Valley.
Photo: Google maps
The country’s current power supply crisis has highlighted the role of the biggest gas user, Methanex, which uses 40 percent of the country’s supply.
The Taranaki methanol plant is shutting until the end of October and selling its gas to Contact Energy and Genesis.
Like Tiwai Point aluminum smelter in Southland, the methanol plants are a legacy of Think Big, the Government programme which built infrastructure and factories with taxpayer funding.
The Methanex plants were built to produce the petrochemical methanol for export, taking advantage of Taranaki’s offshore gas fossil fields.
With gas supplies running low, energy experts and economists say New Zealand needs a plan in case Methanex leaves.
The company is so pivotal to the energy market, Government reports often run two sets of projections, one if Methanex leaves, and one if it stays.
The facilities are now owned by a Canadian company, which also produces methanol in China, Chile, the Middle East and elsewhere.
Economist Brad Olsen of Infometrics says Methanex’s facilities were never meant to operate forever, and workers in the region need a planned transition for if the plants reduce operations or close.
He says the roughly 300 jobs at the company represent about one percent of employment in the New Plymouth area.
“Methanex wasn’t ever expected to and certainly can’t exist forever. It’s difficult to all of a sudden imagine a totally new part of the economy that can stand up a whole percentage point of employment at the drop of a hat, so planning is going to be important.”
“Taranaki does have a number of opportunities it is working on, particularly to add value to parts of the economy that are already strong, like food and fibre”
Methanex is among the top beneficiaries of free carbon credits from the Government, under a scheme to shield exporters from being disadvantaged by New Zealand’s carbon price.
Alex Johnston of campaign group Common Grace Aotearoa says if the company left, that money could be spent on getting workers into other jobs.
“The value of the subsidy currently is about $60 million for last year, which is roughly $200,000 per employee of Methanex. One or two years of that investment would be a really well supported transition for those workers. It’s a massive subsidy per employee currently to support what is essentially a fossil fuel powered business.”
Globally, Methanex says it is exploring low carbon alternative fuels such as biogas.
But Johnston says there’s no sign it seriously considering converting its New Zealand plants out of fossil fuels.
Methanex didn’t want to comment, either on any plans it may have to decarbonise in New Zealand, or its future prospects here.
A company spokesperson said its priority was the safe closure of its plants and a smooth reopening in November.
Closing the plants would free up 40 percent of New Zealand’s gas supplies, but it would also leave gas suppliers without their biggest customer, along with supply contracts that underpin the development and maintenance of gas fields.
Suzi Kerr, an economist at the US Environmental Defense Fund, which tracks emissions from oil and gas, says Methanex leaving would lower New Zealand’s reliance on fossil fuels and free up supplies for other users.
“Methanex was a Think Big project and it’s always kind of depended on Government support. It was built for a need that has passed a very long time ago. I don’t know if they are going to close or not, but if they do and that gas is no longer needed there’s a lot of other options.”
The gas industry says Methanex leaving New Zealand would cause pain for other gas users, because the company underwrites investment in gas fields, benefitting all gas users.
An EY report last year found Methanex closing would make gas more expensive, and lead to a temporary shortage, hitting users who didn’t yet have cleaner alternatives to gas.
That view isn’t shared by all energy experts.
Modelling for the government by Concept Consulting found if Methanex left there would be enough gas in onshore fields to supply remaining users, a cheaper option for the country than developing offshore gas.
When it looked at GDP, the Climate Change Commission found moving Methanex’s closure date by about 10 years to 2040 wouldn’t have much impact on the economy.
However Olsen says a closure would be significant to Taranaki, without a jobs transition plan.