Vancouver’s Methanex Corp. (TSX:MX, Nasdaq:MEOH) plans to shut down one of its methanol plants in Trinidad-Tobago and restart another one that has been idle.
Methanex announced it has signed a two-year natural gas agreement with the National Gas Company (NGC) of Trinidad and Tobago to supply its currently idled Titan methanol plant in the Caribbean Island nation.
The plant has a capacity to produce 875,000 tonnes of methanol per year. Methanol is made from natural gas and is used in a number of chemical processes and as a fuel.
With the new gas agreement, Methanex plans to restart the Titan plant in about a year from now, in September 2024.
However, due to challenges in securing natural gas in the region, Methanex plans to simultaneously shut down the Atlas plant, in which Methanex has a controlling interest (63 per cent). That plant has an annual capacity of 1 million tonnes.
Methanex explained that a 20-year natural gas supply agreement for the Atlas plant expires in September 2024.
“The two-year term of the Titan contract offered by the NGC reflects the challenging near-term gas supply and demand situation in the country,” Methanex CEO Rich Sumner said in a news release.
“Our decision to restart Titan and cease operations at Atlas was based on economic considerations, including significantly lower capital requirements at Titan compared to Atlas.
"The new gas price and lower production volume in Trinidad will reduce annual adjusted EBITDA and free cash flow capability, starting in 2025 and compared to 2023, by approximately $80 million and $40 million, respectively, across a range of methanol prices.”
Sumner said the company would continue to work with the Republic of Trinidad and Tobago and the NGC to secure natural gas supplies to supply its methanol plants in the island nation.
“In the medium to long term, the NGC continues to work with the upstream sector on their plans to develop increased gas supply to the country through various projects, although uncertainty remains," Sumner said.
