Argentina is accused of reneging on a gas supply contract dating to the 1990s which, according to Argentine officials, is no longer feasible because Argentina needs the gas for its own domestic use.
Canada's Methanex Corp., which runs the Cabo Negro methanol plant in Punta Arenas in the Magallanes region, says its operations have suffered because of inadequate natural gas supplies from Argentina's Tierra del Fuego facilities across the Strait of Magellan.
The Vancouver firm began moving some of its Cabo Negro operations to Geismar in Louisiana earlier this year.
Tierra del Fuego, separated from mainland Argentina by the Strait of Magellan, is the only Argentine province without land on the South American continent. Natural gas and oil production is one of its mainstays, but domestic energy consumption in Argentina has soared, reversing trends in the nation's energy supply and demand.
High energy consumption in Argentine winters has led to the Latin American country not being able to export either oil or gas and resorting to imports.
Argentine President Cristina Fernandez de Kirchner wants to cut energy imports and boost local production. Industry sources say Methanex Corp.'s troubles at its Punta Arenas methanol plant are linked to shifts in energy policies in Buenos Aires.
Methanex said shortfalls in Argentine energy supplies had forced it to resort to another restructuring of its operations that will leave 48 people redundant.
"As a consequence of the severe restriction in the supply of natural gas to our Cabo Negro complex, which is already operating at restricted capacity, only one of our four methanol producing plants, Methanex has decided an organization restructuring in Chile which means 48 people will have to leave the company," Methanex Chile General Manager Paul Schiodtz said.
He said the restructuring would ensure an effective organization and optimize production of the company in Chile at competitive costs. "Our previous organization in Chile was designed to operate two plants, which we have concluded is not feasible in the near future," he said.
Despite the adverse situation, Schiodtz said, the company "has a long-term commitment to solving the power problem which impacts on the whole of the Magallanes region."
The company will continue to explore for new natural gas resources in the region, he said.
"We believe Methanex is part of the solution since our demand for natural gas has propped the development of the Magallanes hydrocarbons' industry and introduces a long-term element to the regional energy market since it is a sustained demand and not seasonal, as for the rest of the region," he said.
This is the third time Methanex has had to scale back methanol production because of inadequate natural gas supplies from Argentina. The first production cut in 2008 cost 42 jobs, and another reduction in 2009 led to 37 redundancies.
Methanex expects the Louisiana plant to be operational in late 2014.
The company says it is continuing to examine the viability of utilizing coal gasification as an alternative feedstock in Chile.