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Gas worries reduce T&T’s methanol production
Methanex, which operates a two-plant facility on the Point Lisas Industrial Estate, has blamed problems with gas supplies for its lower methanol production in the first quarter of this year. While T&T tops the list of five countries where the Canadian methanol producer gets most of its earnings, first quarter (Q1) results show that production was doqn from 173,000 tonnes to 149,000 tonnes.
The company said in a statement: “We continue to experience some natural gas curtailments to our Trinidad facilities due to a mismatch between upstream commitments to supply the Natural Gas Company of Trinidad and Tobago (NGC) and downstream demand from NGC’s customers, which becomes apparent when an upstream supplier has a technical issue or planned maintenance that reduces gas delivery. We are engaged with key stakeholders to find a solution to this issue, but in the meantime expect to continue to experience gas curtailments to the Trinidad site.”
Methanex owns 100 per cent of the Titan facility in Point Lisas which an annual production capacity of 875,000 tonnes and a 63.1 per cent interest in the Atlas facility with an annual production capacity of 1,125,000 tonnes (63.1 per cent interest). The company purchases natural gas for its New Zealand, Trinidad and Egypt methanol facilities under natural gas purchase agreements.
The unique terms of each contract include a base price and a variable price component linked to the price of methanol to reduce commodity price risk exposure.
The company posted, for the first quarter of 2014, adjusted earnings before income tax, depreciation and amortization (EBITDA) of US$255 million and adjusted net income of US$160 million (US$1.65 per share on a diluted basis). These figures compare with adjusted EBITDA of US$245 million and adjusted net income of US$167 million (US$1.72 per share on a diluted basis) for the fourth quarter of 2013.
For the first quarter of 2014 compared with the fourth quarter of 2013 and the first quarter of 2013 Methanex-produced methanol costs were higher by US$25 million and US$50 million, respectively, primarily due to the impact of higher realised methanol prices on the variable portion of natural gas costs and changes in the mix of production sold from inventory.
Disclosing a contingent liability, Methanex said: “The Board of Inland Revenue of T&T has issued assessments against Atlas in respect of the 2005, 2006 and 2007 financial years. All subsequent tax years remain open to assessment.
The assessments relate to the pricing arrangements of certain long-term fixed price sales contracts that extend to 2014 and 2019 related to methanol produced by Atlas. Atlas has partial relief from corporation income tax until mid-2014. The company has lodged objections to the assessments. Based on the merits of the cases and legal interpretation, (Methanex) management believes its position should be sustained.”
The statement continued: “We earn the majority of our earnings in Trinidad, Egypt, Chile, Canada and New Zealand. In Trinidad and Chile, the statutory tax rate is 35 per cent and in Egypt, the statutory tax rate is 25 per cent. The statutory rates in Canada and New Zealand are 25 per cent and 28 per cent, respectively. As the Atlas entity is accounted for using the equity method, any income taxes related to Atlas are included in earnings of associate and therefore excluded from total income taxes.”