Enap, Methanex sign Magallanes operating contract

Wednesday, September 2, 2009

Chile's state oil company Enap and Canadian methanol producer Methanex (Nasdaq: MEOH) have signed a special operating permit (CEOP) with the state for the Dorado-Riquelme natural gas block in the far south Magallanes region, mining minister Santiago González announced at a press conference Wednesday.

"This achievement is a clear sign of the interest that exists in our government to support the development of hydrocarbon projects, and also reinforces the fact that there are exploitable and commercially attractive gas reserves in the Magallanes region," the minister said.

Investment in the block, located 120km from the city of Punta Arenas, is expected to reach US$90mn through 2011, González said.

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Enap, which operates the block, does not need separate operating permits for work it conducts in Chile. When other companies wish to explore, however, a CEOP is needed, a Methanex spokesperson told BNamericas previously.

Methanex has four methanol plants in the Magallanes region with combined annual production capacity of 3.8Mt.

Currently only one plant is producing and the company is operating at around 30% of installed capacity due to curtailments of natural gas supplies from Argentina since June 2007.

Methanex vice president for Latin America Paul Schioditz said at the conference that he expects a second plant to come online at the end of this year, but with reduced capacity.

Last week Methanex announced plans to develop a wind farm to power its plants, saving gas needed in the production of methanol and promoting renewable energy in the area.