Pacific Northern Gas responds to Methanex proposal

Pacific Northern Gas Ltd. (PNG), Vancouver, BC, on Friday offered to reduce the transportation toll charged to Vancouver-based Methanex Corp. on natural gas feed to Methanex's its Kitimat methanol plant on the coast of British Columbia.


Pacific Northern Gas Ltd. (PNG), Vancouver, on Friday offered to reduce the transportation toll charged to Vancouver-based Methanex Corp. on natural gas feed to Methanex's Kitimat methanol plant on the coast of British Columbia.

Methanex on Aug. 4 announced a plan for British Columbia's provincial government and PNG to share the costs and risks of Methanex's Kitimat methanol business in order to reopen the plant (OGJ Online, Aug. 4, 2000). Poor economics had prompted Methanex to close the plant.

PNG's counterproposal would reduce the transportation toll charged to Methanex by 55%. The deal is contingent on Methanex agreeing to a new long-term contract with PNG. Under PNG's proposal, the toll would be reduced to the equivalent of $11 (US)/tonne of methanol produced at Kitimat, compared to total estimated methanol production costs of $170 (US)/tonne.

Roy Dyce, president and CEO of PNG, said that, under PNG's counterproposal, the toll to Methanex for transportation of natural gas would represent only 6.5% of total methanol production costs.

PNG has no control over other production costs incurred at Methanex's Kitimat facility, particularly the commodity price of natural gas, said Dyce. Subject to BC Utilities Commission approval, he said, "We have offered to substantially reduce our transportation toll, but that alone won't solve Methanex's problems. In fairness to our other customers, the communities we serve, our employees, and shareholders, we can only go so far, and only in return for long-term commitments from Methanex."

PNG will continue to have discussions with various parties, including Methanex, the provincial government, and the office of the Job Protection Commission to help establish the conditions under which Methanex will reopen the Kitimat plant.

More in Petrochemicals