Methanex seeks Chilean gas as Argentina hikes tax

Methanex has signed an agreement with Chile's Empresa to accelerate gas exploration and development on the Dorado Riquelme exploration block and to supply gas to Methanex's production facilities.

May 8, 2008

2 min read

Eric Watkins
Senior Correspondent

LOS ANGELES, May 8 -- Methanex Corp., Vancouver, BC, has signed an agreement with Chile's state-owned Empresa Nacional del Petroleo to accelerate natural gas exploration and development on the Dorado Riquelme exploration block and to supply new Chilean-sourced gas to Methanex's production facilities in the country.

Under the agreement, which remains subject to government approval, Methanex will contribute about $100 million in capital over the next 3 years and will have a 50% participation in the block.

Gas deliveries are expected to begin later this year from the block, which Methanex said has the potential to become a major supply source for its facilities in Chile.

Methanex's methanol production facilities are at Cabo Negro near the city of Punta Arenas. Its four methanol plants have a combined annual capacity of 3.8 million tonnes and produce about 10% of the world market.

Methanex was prompted to step up exploration and production in Chile following actions by Argentina, which earlier had supplied the Canadian company. Argentina increased its export duty for gas to 100% (from 45%) of the highest contracted import price of gas into Argentina.

"We are disappointed in the way the export duties were implemented as we believe it did not take into consideration the impact on the economy of southern Chile," said Paul Schiodtz, Methanex senior vice-president for Latin America.

Methanex had been operating its plants at only 30% capacity since June 2007 because of Argentina's gas export curtailments.

As a result of the tax increase, Schiodtz said Methanex's long-term strategy would be to source more gas supply from Chile.

He said Methanex expects that new exploration projects in the Magallanes region of Chile by ENAP and other international oil and gas companies "will continue to be developed with a sense of urgency."

Chile likewise is stepping up efforts to source and develop domestic gas supplies. Earlier this week, it signed contracts with four international oil companies for the development of gas reserves in the Magallanes region (OGJ Online, May 5, 2008).

Contact Eric Watkins at [email protected].