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MeneameCanadian methanol producer Methanex (Nasdaq: MEOH) expects to start up a second plant at its Cabo Negro complex in southern Chile's Magallanes region in the next few weeks, company president and CEO Bruce Aitken said during a webcast on third quarter results.
"We expect gas supply from Dorado Riquelme to ramp up over the next quarter and with the southern hemisphere winter ending and more gas becoming available from traditional sources we are planning to start a second plant in the next few weeks," Aitken said.
"Our plan is to operate two plants at reduced rates and we expect this will result in more than 20% higher production from our Chile site over the next year," the executive said.
"We're assuming in that number [20%] that we'll be able to produce from two plants for about eight months of next year and that we'll probably go back to one plant during winter," Aitken added.
Methanex has four plants at the Cabo Negro complex with annual production capacity of 3.8Mt. The company has been operating at between 25% and 30% of installed capacity due to curtailments of natural gas supply from Argentina since June 2007.
PRODUCTION
During the third quarter Methanex produced 197,000t at its facilities in Chile, down 19.9% from 246,000t in the year-ago period.
"This was a disappointing result as some technical issues led to unplanned outages and a loss of production of about 65,000t," Aitken said during the webcast.
GAS SUPPLY
Methanex has agreements with London-listed GeoPark (LSE: GPK), Chile's state-owned energy company Enap and others to accelerate natural gas exploration and development in southern Chile.
"Combined production from these two blocks [Fell and Dorado Riquelme] now represents around half of the gas supplied to our Chile site," Aitken said. The Fell block alone supplies about one-third.
Methanex signed an agreement in 2007 to provide US$40mn in financing to support GeoPark's development activities in the Fell block and recently agreed to provide GeoPark with US$18mn of additional financing to step up its exploration program.
On August 24, the company received final government approval of the agreement signed in 2008 with Enap to develop Dorado Riquelme and supply Methanex's facilities. Under the agreement Methanex will fund a 50% participation in the block and as of September 30 had contributed US$59.7mn.
"Based on the significant increase in gas exploration activity expected to occur in southern Chile over the next couple of years and the success already achieved, we continue to be optimistic about returning our Chile site to a full plant operation over the next few years," Aitken said.
"We expect to continue committing capital to accelerate gas development in southern Chile," the CEO added.
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