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Gas supply issues cause halt to production in Iran’s Kaveh methanol plant

US Rep. Ilhan Omar (D-MN) (L) talks with Speaker of the House Nancy Pelosi (D-CA) during a rally with fellow Democrats before voting on H.R. 1, or the People Act, on the East Steps of the US Capitol on March 08, 2019 in Washington, DC. (AFP photo)
A major manufacturer of methanol in Iran has announced it is halting production over gas supply issues.

A top methanol manufacturer in Iran has announced it is halting production over natural gas supply issues

The managing board of Kaveh Methanol Petrochemicals said in a letter published on Tuesday that it had halted production in its factory in the southern Iranian province of Bushehr after state-run petrochemicals authority ordered a 50% reduction in supply of natural gas to the company.

Natural gas is the main feedstock used by methanol producers as plants also rely heavily on the energy source for their utility services.

However, the letter by Kaveh Petrochemicals addressed to the association of Iranian petrochemical manufacturers said that the decision to halt production in the methanol plant had been adopted after prices of gas supplied to the factory increased considerably in recent weeks to reach 87,770 rials ($0.31) per cubic meter.

It said the price was uncompetitive compared with rates in Europe and in the US, adding that the hike will cause the price of each ton of methanol produced by Kaveh to increase to at least $430 per metric ton.

“Based on this and with this huge loss, manufacturing will have no economic justification at all,” read part of the letter.

The statement comes amid a massive increase in the daily use of natural gas in Iran that has been caused by freezing cold weather.  

Oil Ministry figures published last week showed that daily gas consumption in the Iranian household and commercial sectors had soared to an all-time record of 692 million cubic meters per day on Saturday.

The soaring demand for gas has also affected pressure facilities in northwest Iran, resulting in a major reduction in gas exports to neighboring Turkey.

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