Methanex Boosts Low-Cost Chile Plant with Dresser-Rand Supplying Power Equipment

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Methanex Corporation (TORONTO: MX, NASDAQ:MEO) (Vancouver, British Columbia) has contracted with Dresser-Rand, a company in the Ingersoll-Rand group (NYSE:IR) (Hamilton, Bermuda - Woodcliffe Lake, New Jersey) for a standard multi-stage generator package as it expands its methanol production facility in Puntas Arenas, Chile. Methanex is writing down the carrying value of its methanol production assets in New Zealand and Alberta (PEC: 56000294/86000272). The non-cash before and after-tax charge of approximately $130 million will be taken in the fourth quarter of 2003.

In February 2003, following a re-determination process, Methanex lost substantially all of its remaining contractual natural gas entitlements from the Maui field offshore New Zealand. After pursuing multiple supply options, it has not been able to secure sufficient quantities of natural gas feedstock at an economical price to meet demand in the Asia-Pacific region. The company is looking at three interconnected options: to expand their existing terminal in Korea to expand terminal capacity in Asia generally and to supply the terminals from increased production in Chile or Trinidad.

The Alberta Medicine Hat facility has been idled since 2001 and the write down of the plant reflects the company's view on long-term North American natural gas prices and its reduced reliance on North American production as it continues to implement its low-cost strategy of expanding methanol capacity in regions with low feedstock costs.

Resident and COO of Methanex, Bruce Aitken commented on the situation, "The write-down of these assets reflects the changed economics for natural gas in both New Zealand and North America. Despite the write-downs, we continue to work to secure enough gas to produce from 0.5 to 1.0 million tons of methanol in New Zealand during 2004. Prospects beyond 2004 are uncertain. We continue to view Medicine Hat as valuable swing capacity to supplement our low-cost methanol production hubs in Chile and Trinidad."

The Methanex plant in Puntas Arenas in the far south of Chile is undergoing its third expansion phase since it first went online in 1988 and was acquired by Methanex in the early 1990s. When completed in 2005, Plant 4 will increase the facility's manufacturing capacity by 840,000 tons of methanol per annum to bring its total output to 3.48 million tons and maintaining its status as the largest methanol producing complex in the world.

Prior to the new contract, Dresser-Rand supplied both centrifugal compression equipment and steam turbine generator sets for Plants 2 and 3 in expansions in 1996 and 1999. The steam turbine equipment for Plant 4 will be manufactured at the company's facility in Wellsville, New York and is scheduled to be shipped in March 2004. (PEC 14002634)

Rick Whinery, Dresser-Rand's Project Development Manager says, "Producing methanol is similar to producing ammonia. The successful history that we've established with steam turbine drivers for ammonia as well as methanol production, is significant."

Methanol is a liquid petrochemical that is synthesized under pressure in a catalytic process, usually requiring natural gas as a feedstock. Once distilled to chemical grade methanol is used in the production of additives for gasoline to reduce emissions. In addition, methanol can be used as fuel for fuel cells or for power generation. It is also used in the production of formaldehyde and other chemicals.