Methanol '03: North America to lose more chem capacity?

15 October 2003 22:53  [Source: ICIS news]

WOODLANDS, Texas (CNI)--North America will continue to lose chemical production in the years ahead due to continuing high cost of natural gas and volatility in gas pricing, Terra Industries president and chief executive Michael Bennett predicted here Wednesday.

Addressing the first annual Methanol Forum here today, Bennett warned that "continued volatility in feedstock costs will result in loss of chemical production capacity due to economic shock and/or lack of investment."

He said that while natural gas production in the US is expected to increase this year, it will be flat in 2004 as depletion of existing wells offsets new production.

"You're not going to see $2/m Btu gas again anytime in this [2003-2005] time frame," he told some 100 methanol executives at this conference.

He said: "No matter how you cut it, continuing volatility in natural gas will make planning and reinvestment difficult for US chemicals producers."

Citing the US methanol industry as an example, Bennett noted that in 1999 the US had 7.3m tonne/year of methanol production capacity. But capacity shutdowns since then by Ashland, Borden, Fortier, Enron, Georgia Gulf, Motiva and Sterling have idled nearly half of US capacity, leaving present US methanol capacity at some 3.9m tonne/year.

Bennett said that until US producers can get access to and deliver available additional natgas reserves, the US should maximise use of other energy sources, in part by keeping coal-fired power plants running and limiting construction of gas-fired power generators.

He also urged a moratorium on US gas and electricity exports to Mexico until Mexican gas reserves are opened to the US. And he called for expedited expansion of existing liquid natural gas (LNG) terminals and expedited permit approvals for new LNG terminals.

He predicted that the wellhead price of natural gas in the US will remain in the $5 range this year and perhaps moderate to $4 m/Btu in 2004.

The build in US natgas reserves, he said, has been impressive, and the country has adequate supplies going into the North American winter. Consumer prices for natgas will be higher this winter than last, he said, but - barring a sudden worsening in winter weather - should not be extremely disproportionate to last winter's prices. Consumer costs for natgas, he noted, bear heavily on US political decisions regarding energy resources and consequently impact chemicals producers.

Co-sponsored by the Methanol Institute (MI) and Jim Jordan & Associates (JJA), the Methanol '03 Forum runs through Thursday.

Terra Industries is headquartered in Sioux City, Iowa. MI is based in Washington, DC, and JJA based in Houston.

By: Joe Kamalick
+1 713 525 2653

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