THE collapse this week of the $800 million Methanex project has put the spotlight on other potential projects on the Burrup Peninsula.
THE collapse this week of the $800 million Methanex project has put the spotlight on other potential projects on the Burrup Peninsula.
The collapse has also focused attention on the issue of government-funded infrastructure support for private sector projects.
Both Methanex and the State Government have criticised the Commonwealth for what they see as a withdrawal of funding and support for the project.
The Commonwealth says it was shocked and disappointed, insisting the decision by Methanex was made on commercial grounds.
Despite the Methanex collapse, the State Government is proceeding with the development of $170 million of ‘common user’ infrastructure on the Burrup Peninsula, even though Burrup Fertilisers is the only project that has commenced construction.
There are several other gas projects proposed, including Dampier Nitrogen, Japan DME and DME International, with the most advanced project believed to be the Liquigaz project backed by GTL Resources.
State Development Minister Clive Brown expressed disappointment at the collapse of the Methanex project and said the Commonwealth should accept some of the blame – a view backed by Methanex.
In a speech delivered last month, Methanex president Bruce Aitken named withdrawal of the Commonwealth incentive package as the one impediment to approval of the project.
“We’ve left a very clear message in Canberra that we will cancel our project if the government changes the rules,” Mr Aitken said.
“Foreign investors don’t come to countries where on one day you’re promised something and the next day it’s taken away with no rational explanation.”
Methanex will post a $US40 million (A$60 million) write-off against third-quarter earnings to cover its development costs.
“Capital costs for the proposed project have escalated to an unacceptable level,” Methanex chairman and CEO Pierre Choquette said.
“We have rigorously studied several combinations of sites, technologies and scale in Australia, but we have been unable to develop a methanol project that delivers acceptable returns for our shareholders.”
Mr Brown said that if Commonwealth support was maintained for the project, then it might not have been lost to WA.
Mr Brown called on the Federal Government to use part of its record $7.5 billion budget surplus to help secure major gas processing projects for Western Australia.
“The Commonwealth Government
originally offered Methanex $110 million to locate in Darwin, an amount reduced to $85 million when the company decided to relocate its two million tonnes per annum methanol project to the Burrup Peninsula,” he said.
“Following the reconfiguring of the Methanex project as a 1.3 million tonnes per annum plant, the Commonwealth cancelled their support.
“Although the current plant proposed by Methanex is smaller than originally anticipated, it remained a significant investment and the Commonwealth should have supported it.”
Kirsty Boazman, a spokeswoman for Federal Industry and Resources Minister Ian Macfarlane, said the announcement came as “quite a surprise” but maintained the Government should not be held responsible for the decision
“They [Methanex] had a further application for Federal Government support that was due to be considered this week, which makes us believe the decision was made on commercial grounds,” she said.
“They’ve [Methanex] talked about problems with capital costs prior to this announcement.”
The North West Shelf Venture, which had agreed to supply gas to Methanex, expressed disappointment at Methanex’s decision.
“North West Shelf Gas has provided extensive support to Methanex in its efforts to develop a methanol plant in Western Australia over the past three years,” North West Shelf Gas general manager John Richards said.
“During that time we have committed an enormous amount of time, effort and assistance in an effort to make Methanex’s project a reality in a challenging environment.”
