Commentary: Wave of US methanol

27 February 2012 00:00  [Source: ICB]

The US shale gas boom has led to a surge in new cracker projects. Methanol could be next as cheap and abundant natural gas provides the incentive

The deluge of new US crackers and expansions arising from the shale gas boom may soon be followed by a wave of new methanol capacity. The production of both ethylene and methanol benefits from cheap natural gas. The US has plenty of it and methanol is still imported into the country.


Could the US one day be awash in methanol?

Copyright: Rex Features

Canada-based producer Methanex is already planning to move one of its four plants in Punta Arenas, Chile, to Geismar, Louisiana, on the US Gulf Coast, as there is insufficient supply of gas in the former region.

The move is estimated to cost $400m (€300m) and to be completed by the second half of 2014. Today only one of the four plants in Chile is running, with a capacity of 850,000 tonnes/year. The other three plants have capacities between 800,000-975,000 tonnes/year, as assessed by ICIS.

And the company may yet move another one of the idled plants to the US, noted Charles Neivert, analyst at US-based investment bank Dahlman Rose & Co.

"The advantages of this option are that the time frame may be the shortest, the gas is most available, and the Louisiana site has available room for the unit," said Neivert. "The disadvantage is that although the second move may be less costly and require less time, it is still going to entail a capital outlay."

Methanex CEO Bruce Aitken said on the company's fourth-quarter conference call that the Louisiana site "has space for multiple plants, so we will consider future expansion."

The company has the financial means for such expansions. At the end of 2011, it was sitting on $351m in cash and an undrawn $200m credit facility. It also had $903m of debt, which is more than manageable with robust earnings before interest, tax, depreciation and amortization (EBITDA) of $427m in 2011 and a favorable outlook for 2012.

Also in the US, OCI North America plans to restart an idled 750,000 tonne/year methanol plant later this quarter. The plant was bought from US-based Eastman Chemical from a group of investors in May and then sold to Egypt-based Orascom Construction Industries,

After a period when just about the entire North American methanol industry had shut down, with production moving overseas, it is now making a comeback.

Undeniably, there is an incentive for methanol production in the US with cheap and abundant natural gas feedstock and growing demand worldwide.

Additional reporting by Lane Kelley in Houston

By: Joseph Chang
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