JV's purchase of US Eastman's methanol plant a bargain - sources

17 May 2011 00:09  [Source: ICIS news]

HOUSTON (ICIS)--US methanol observers said on Monday that a joint venture's purchase of a mothballed Texas plant from Eastman Chemical was a bargain, even if restarting the facility will take longer than originally expected.

Announced earlier this year, the announcement of the deal on Monday revealed a new player - OCI Nitrogen - and a hint of the purchase price.

OCI has paired up with Pandora Methanol, headed by operator Deo Van Wijk, according to its announcement. Their joint venture (JV) will spend around $65m (€46m) this year in acquisition and various start-up costs.

Van Wijk said Netherlands-based OCI had been a partner in the deal since January. He said the joint venture is a 50-50 partnership, even though OCI said it owned 50% plus one share.

“That’s just for accounting purposes,” Van Wijk said.

Ammonia production at Beaumont, with an expected capacity of 250,000 tonnes a year, should start in the fourth quarter. Methanol production, with 750,000 tonnes of annual capacity, will start either later this year or in early 2012, Van Wijk said.

A methanol observer cited the recent cost of building a plant in Damietta, Egypt. That joint venture, involving Methanex, had a cost exceeding $700m.

The cost of restarting the plant, located in Beaumont, will come in at a small fraction of that price, the source said.

“It’s a pretty good deal, to get a 1m tonne plant for $65m,” he said. “If you had to build a new one, it would cost you $750m.”

A number of hurdles delayed closing the deal in February, as originally planned, including Pandora’s having to buy the plant property instead of leasing it.

Whatever the split in the joint venture, a methanol source said OCI gave Van Wijk more money to get through the hurdles of the deal.

“I think these guys are going to make a big splash,” the source said.

Originally, Van Wijk said methanol production would begin in the summer of 2011.

But industry sources discounted Van Wijk’s timescale as optimistic because of the permitting process required regulators.

($1 = €0.71)

For more on methanol, visit ICIS chemical intelligence

By: Lane Kelley
+1 713 525 2653

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