Methanex aids Magallanes gas exploration in Chile

By OGJ editors

Methanex Corp., Vancouver, BC, said it has a primary goal to progressively increase methanol production in Chile with natural gas from suppliers in southern Chile as its Argentina gas supply declines.

Methanex is investing with Chile’s state Empresa Nacional del Petroleo (ENAP), GeoPark Chile Ltd., and others to help accelerate gas exploration and development in the Magallanes basin.

Despite the investments, Methanex said, “the timelines for significant increases in gas production are much longer than we had originally anticipated and existing gas fields are experiencing declines. As a result, the short-term outlook for gas supply in Chile continues to be challenging.”

The company produced 82,000 tonnes of methanol at its Tierra del Fuego site in the quarter ended June 30 by operating one of its four plants at 30% of capacity. It has begun dismantling one other, a 1 million tpd unit, for relocation to Geismar, La. (OGJ Online, Aug. 14, 2012). And it is examining the viability of other projects to increase utilization of the Chilean assets.

Methanex is working with ENAP to develop gas on the Dorado Riquelme block. Under the arrangement, Methanex funds a 50% participation in the block and had contributed $111 million as of June 30, 2012.

Over the past few years, Methanex has also provided funds to support and accelerate GeoPark’s gas exploration and development in southern Chile. GeoPark has agreed to supply Methanex with all gas sourced from the Fell block under a 10-year exclusive supply arrangement that began in 2008.

In the quarter ended June 30, all of Methanex’s Chilean methanol was produced with gas from the Fell and Dorado Riquelme blocks (see map, OGJ, Dec. 24, 2007, p. 36). Methanex is also participating in other exploration blocks with international oil and gas companies and as of June 30 had contributed $14 million for its share of the exploration costs.

GeoPark, for example, produced an average 26.4 MMcfd of gas on the Fell block in the quarter. Its 2012 capital program of $220-240 million is on track with 45-55 new wells. Five exploratory wells on the Tranquilo and Otway blocks have spud dates between July and October 2012.

In recent drilling on the Fell block, the Kosten-1 discovery is producing 1.5 MMcfd of gas and 11 b/d of condensate, natural, and the Kiuaku-1 discovery is making 4.9 MMcfd, natural, both from the Springhill formation. The Tobifera formation had gas and oil shows and remains to be tested in Kiuaku-1.

Chile’s Ministry of Energy signed special operations contracts with GeoPark and ENAP in the first half of 2012 covering the Campanario, Flamenco, and Isla Norte blocks. GeoPark committed to spend more than $101 million on the three blocks in the next 3 years. It shot 289 sq km of 3D seismic in the first half out of a total committed 1,500 sq km and will drill on Flamenco within 6 months.

Methanex said the future operating rate in Chile mainly depends on residential gas demand, which is higher in the southern hemisphere winter, production rates from existing gas fields, and the level of deliveries from future drilling.

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