MercoPress. South Atlantic News Agency

Punta Arenas methanol plant diversifies gas supply

Methanex plant located at Cabo Negro, Punta Arenas

Canada's Methanex Corporation the world's largest producer of methanol announced it agreed to finance Chilean natural gas explorations by GeoPark holdings in exchange for a share of the gas it finds in the Magallanes basin.

Methanex said in a statement released last week it signed a gas prepayment agreement with GeoPark to provide it with 40 million US dollars in financing to support and accelerate its natural gas exploration and development activities in the Fell Block in the extreme south of Chile. The agreement is meant to help Methanex secure its natural gas supply to its Punta Arenas plants hampered by shortages for the fuel from neighboring Argentina. Methanex has been increasingly forced to cut production at its Punta Arenas methanol plant by natural gas supplies cutoffs from Argentina which has a policy of privileging domestic demand in spite of international contracts. The Vancouver-based company which has been struggling with its gas supplies since 2005 has only one of its four Chilean plants operating. Earlier this month, Chile's government assigned nine oil exploration blocks in the Magallanes basin to France's Total S.A.; Apache Canada; U.S. company Pan-American Energy;New Zealand's Greymouth Petroleum; and U.S.-Swiss consortium IPR-Manas. Under the agreement GeoPark will provide Methanex with natural gas supply sourced from the Fell Block under a 10-year supply agreement, Methanex said. "The agreement secures an economic long term market for all of GeoPark's Chilean gas production while also providing a source of financing to accelerate capital investment," the company said. GeoPark already supplies natural gas to Methanex and expects to represent 10% of the Punta Arenas plant provision by the end of 2008. GeoPark is a Latin American oil and gas producer and explorer with properties in Argentina and Chile. GeoPark shares are listed for trading on the Alternative Investment Market (AIM) of the London Stock Exchange under the trading symbol "GPK".