P.M. cites merits of Petrocorp plan

Press, 12 April 1980, Page 11

P.M. cites merits of Petrocorp plan

pA Wellington The State-run Petrocorp methanol plant will be more efficient than the plant proposed by the British Petroleum-Chal--1 e n g e-Fletchers consortium, the Prime Minister (Mr Muldoon) has said. Mr Muldoon, explaining his decision to go to Alberta Gas-Petrocorp, said: “The 2000-tonne (per day) B.P.C.F. plant has an economy of scale but this is offset by the superior efficiency of operation of the 1200 (tonne per day) Alberta-Petrocorp plain and the earlier starting date resulting from a shorter design lead time.” The time saved was estimated at between six and 10 months and represented “a very large sum of money,” he said. “All parties and consultants agree that 1200 tonnes of chemical methanol can be. sold at full price,” Mr Muldoon said. •Both the return to the consortium and the gas price would be eroded if a B.P.C.F. 2000-tonne per day plant had to sell up to ”800 tonnes a day at a discounted price or screw down its production because the full amount is unsaleable.”

Mr Muldoon said the return on the gas would be similar for each project only if capital cost-effi-ciency and projected markets were attained, and larger plan* could see these eroded by' market risk. “Alberta Gas produces and markets methanol. BP does not. Very large sums of money have to be raised on the international finance market. The cost of raising these funds will be affected by the degree of risk in the project. Unquestionably, the greater risk is in the larger project.” The Alberta Gas-Petro-corp proposal was more efficient in gas usage, Mr Muldoon said, using less gas in absolute terms but earning an earlier return. This would postpone the building of the Maui B platform, aspects of which would entail considerable cost. The early return and the

fast gas flow that could be accommodated from the Maui A platform justified the project, Mr Muldoon said. “It certainly does not warrant any type of risk.” “The risk of the B.P.C.F. proposal in the light of uncertainties was an overriding consideration.” Mr Muldoon said there was a large body of New Zealand investors, both private and institutional, awaiting the chance to invest in such projects. “The possible opportunthat will be given to participate on an equity basis should generate an interest in debt funding from a number of institutions. The Petrocorp proposal to my mind is ‘bankable’ provided the proposals are properly presented to the local and/or overseas investors. I am certain that given satisfactory cash flow and profitability projections funds will be available,” Mr Muldoon said.