Methanex, ENAP in deal to expand Chile gas field

(In U.S. dollars)

VANCOUVER, British Columbia, May 5 (Reuters) - Methanex Corp (MX.TO) has signed a tentative deal with the Chilean state energy company to expand natural gas development off the coast of southern Chile, the methanol producer said on Monday.

Methanex will spend about $100 million over the next three years to add equipment and employees to help Empresa Nacional del Petroleo (ENAP) develop the Dorado Riquelme exploration block, on which work is already well under way.

Methanex has turned to Chilean natural gas for its methanol plants in southern Chile to replace gas supplies from Argentina that have been cut off as that country grapples with its domestic energy needs.

Natural gas is used to produce methanol, and Methanex has felt the financial sting of the production cutbacks at its Chilean plants, which have forced it to buy replacement supplies from other producers.

The company expects to receive its first shipments from the Dorado Riquelme block later this year. The deal with ENAP is subject to approval by the Chilean government. (Reporting Allan Dowd, Editing by Peter Galloway)