Despite the drop in natural gas prices, Vancouver-based Methanex said Tuesday that the shutdown of its 470,000 tons/year Medicine Hat, AB facility, which uses natural gas in its methanol production, has been extended for an “indeterminate period” because of the plant’s “current non-competitive cost structure.” However, Methanex said it would move ahead on construction of a new facility in Trinidad, which it said will be less costly to operate.

Customers now supplied from Medicine Hat will be supplied by other Methanex locations. With the shutdown, the company said it expects to realize annual plant fixed and capital maintenance cost savings of about $10 million because the plant will be mothballed and the 95 employees relocated to other facilities or laid off. In the third quarter of 2001, Methanex said there will be a one-time charge to earnings of approximately $11 million, mostly for employee severance and mothballing costs.

Production sales for the first half of 2001 were 2.5 million tons, about 18% lower than a year earlier, the company said in its second quarter report in July. Total sales volumes for the second quarter also were lower, standing at 1.8 million tons, compared with 1.9 million tons in the first quarter of 2001, and 1.7 million tons for the second quarter of 2000. Most notable in its effect on the Medicine Hat facility was that more than 90% of Methanex’s production in the second quarter of 2001 was from its low cost New Zealand and Chilean facilities. The Medicine Hat closure, officials noted, “was necessary to balance production levels with global customer requirements …. global economic growth has resulted in softer demand for methanol and lower methanol prices.”

In a deal worth about $17 million, Methanex entered into an agreement with the Beacon Group Energy Investment Fund in July to acquire Beacon’s right to participate in the 1.7 million tons/year Atlas methanol project in Trinidad, and it was also granted an option to acquire Beacon’s 75% interest in the 850,000 tons/year Titan methanol plant in Trinidad. Methanex and partner BP Plc are planning to spend $400 million to build the Atlas facility. Methanex will hold a 63% stake, while BP will have a 37% stake in the plant, which is expected to begin production in early 2004. Nearly half of the production is already committed for sale on long-term contracts to the two partners.

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