INSIGHT: North American methanol's new pattern - plants in the US

16 July 2012 14:53  [Source: ICIS news]

Celanese Clear Lake site in TexasHOUSTON (ICIS)--A new pattern in North American methanol began taking shape last year when Methanex restarted a plant in Canada at Medicine Hat, Alberta.

By that time, April 2011, there were two of a kind already, because it was known that a mothballed Texas methanol unit in Beaumont might be restarted.

After that came more announcements, all along the US Gulf Coast. LyondellBasell plans to restart a unit at Channelview, Texas, near Houston, in late 2013 or 2014; Methanex is likely to move one of its idled plants in Chile to Geismar, Louisiana, also with a 2014 target date; and Celanese will build its own methanol unit at the company’s acetyls’ complex in Clear Lake, Texas, and have it running by 2015.

The pattern became clearer earlier this month when a subsidiary of Orascom Construction Industries (OCI) started the Beaumont plant on 4 July.

The US and Canada have become a magnet for methanol projects in the past two years, mostly because of the shale gas revolution and its promise of cheap natural gas feedstock.

It doesn't take too much of an imaginataive leap to see an historic comeback in the works, with North America again becoming a major methanol producer. “I think that’s a reasonable assessment,” said methanol operator Deo Van Wijk, who engineered the deal that led to the restart of the Beaumont plant, though he eventually sold his interest to OCI.

Van Wijk can remember when the US did not have to import most of the 5-6m tonnes of methanol that it does now.

In 1997, North American methanol plant capacity totaled 9.4m tonnes/year, with 19 plants in the US and Canada providing roughly a third of world methanol supply and demand, according to Jim Jordan and Associates.

Then came a new decade that brought sky-high feedstocks - oil soared to $147/bbl and natural gas to more than $15/MMBtu - that led to the closing of nearly all of those methanol units. By the end of 2010 there were only two methanol plants left in all of North America, with total capacity of 780,000 tonnes/year.

Recent activity shows the beginnings of a comeback. North American methanol capacity has more than doubled with the Alberta and Texas units. It would double again with the two announced restarts and the Celanese project.

Data provided by Jordan at a seminar last year predicted that North American methanol capacity will increase to 3.8m tonnes/annually by the end of 2014.

Most of the scheduled methanol restarts appear to be chemical producers betting on natural gas prices to stay in low single digits for the foreseeable future. But in at least one case there is a contractual dispute behind the move.

That dispute, between Southern Chemical Corp (SCC) and Celanese, is revealed in a lawsuit that has spent five years winding its way through Texas courts and which goes to trial on 16 July in Houston.

It is probably not the only reason why Celanese plans to build its own 1.3m tonne/year methanol plant at Clear Lake, as the company announced in June. But the suit does provide a legal drama behind the acetyl giant’s move to make its own methanol.

Neither company would talk about the suit. Celanese’s new chief executive, Mark Rohr, was quoted in news stories on the project saying that, with natural gas now so cheap in the US, it just made sense for Celanese to make its own methanol. What Rohr did not say was that Celanese might lose its major methanol supplier because of the litigation with SCC.

For some background, Celanese makes acetic acid - its flagship product - at a huge plant in Clear Lake with methanol purchased from SCC, a company based in Houston. SCC is the North American marketer for MHTL in Trinidad, which operates five methanol plants on the Caribbean island. Celanese is SCC’s largest customer.

The two companies signed a contract in June 2003 calling for SCC to supply Celanese with 700,000 tonnes of methanol annually for at least 10 years beginning in July 2005, according to court documents. The lawsuit did not state the price they agreed on, but industry sources said the price was buyer-friendly - one source said it was 55 cents/gal. It took a few years for the relationship to sour, but the dispute seems clear from the reams of depositions and briefs filed in the case.

During the first years of the contract, methanol spot barge prices doubled, from 75 cents/gal in June 2003 to $1.45 cents/gal by May 2007, and prices eventually rose above $2/gal. It’s not hard to see why SCC wanted out of the contract, which is why the company originally filed suit in April 2007. Nor is it hard to understand why Celanese wanted to maintain the deal.

Whatever the outcome of the suit, it seems hardly coincidental that Celanese plans to make its own methanol at a plant that will begin operating in mid-2015, the same year its contract with SCC runs out.

By that time, the comeback of the US methanol industry may have added some more pinpoints.

There is talk of another new plant project in the US. Methanol sources say it is hard to underestimate the long-term implications of all these projects.

The latest data from the US International Trade Commission show that in May 2011, Trinidad supplied 81% of US methanol imports, but in May this year Trinidad’s share dropped to 62%. Methanol sources say it is simply a zero-sum game that more US methanol plants mean fewer US customers for the units at the Point Lisas Industrial Estate in Trinidad.

Trinidad wants more methanol business, too, but in derivatives. Earlier this year, the tiny country’s energy ministry gave the nod for a huge methanol-to-olefins (MTO) and methanol-to-petrochemicals (MTP) project to a consortium comprising Saudi Basic Industries Corp (SABIC) and China’s state-owned Sinopec.

Sources have since said that the project appears to be in doubt because of faltering talks over a natural gas contract.

Methanex chief executive Bruce Aitken went on the record with his doubts in May, saying the US would seem to be a more attractive target country now for such a project because of US natural gas prices.

Aitken said the US natural gas price advantage is the main reason Methanex is making plans to move a methanol plant from Chile to Louisiana in 2014.

“My observation is that if you can buy gas in the US at $2, people are going to be building olefins units in North America,” Aitken said.

($1 = €0.82)

By: Lane Kelley
+1 713 525 2653

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