Another blow for industry: Methanex proposes idling one plant indefinitely, job cuts

In another blow for industry in New Zealand, Methanex, the country’s largest gas user, has proposed shedding staff and moving from a two-plant operation to a one-plant operation “for the forseeable future”.

Methanex’s plants are shuttered until the end of October after the company agreed to sell the gas it would have used to Contact Energy and Genesis Energy.

However, the company is now consulting on returning to a smaller operation, with fewer roles and just one plant with the other “indefinitely idle”. It comes after Winstone Pulp and Paper confirmed it would shut two mills at a cost of 230 jobs, also blaming high energy prices.

“This is a disappointing outcome for us. It means we are likely to lose many valued and experienced people,” managing director Stuart McCall told the Herald in a statement.

He said Methanex “has started consulting on how to best operate its New Zealand assets and what structure is required to move from a two-plant operation to a one-plant operation for the foreseeable future”.

He said this was to “match the current gas outlook”, which is poor.

A report released by the Ministry of Business, Innovation and Employment (MBIE) earlier this year said there was a 20% reduction in New Zealand’s natural gas proven plus probable reserves over the past 12 months. About 44% of that reduction was due to the gas being extracted and used, and the rest was due to other factors like operators downgrading the amount of gas they believe they have.

“Policy settings since 2018 have not been conducive to sustain gas supplies at sufficient levels to operate more than one plant. The impact of under-investment and the lack of success of the upstream activities that have been undertaken have driven this decision and have contributed to the recent energy crisis,” McCall said.

He said a proposed restructure had been shared with his team and he expected plans to be finalised by the beginning of October.

“The decision to consult on our organisation structure and indefinitely idle one of our Motunui plants comes almost three years after we shut down and indefinitely idled our Waitara Valley plant in 2021.”

He said the business was going to continue operating its last remaining Motunui plant, but warned the gas outlook for New Zealand was “challenged and requires significant and immediate action by the Government to incentivise upstream developers to arrest declining supplies and return New Zealand energy and natural gas markets to their potential”.

“Without such action, we are compromising the country’s economic prosperity, energy security and our ability to continue to operate beyond the near-term. We remain committed to our long-standing role in the country’s energy sector; however, our primary concern right now is the wellbeing of our people and their families,” McCall said.

More to come...