Price & Market Trends: Trinidad contributes to US methanol renaissance

28 September 2012 10:25  [Source: ICB]

The US could easily see methanol production capacity triple as its largest supplier Trinidad struggles with curtailments

What sounds like a Robert Ludlum thriller - the Trinidad curtailments - have put a spotlight on the tiny Caribbean country's continuing status as the largest source of US methanol imports.

 

Methanex restarted a plant in Alberta, Canada, in April 2011

During any given month, Trinidad supplies 65-70% of American imports, but that may not be for long. Production and exports from Trinidad's seven methanol plants have declined slightly but steadily since 2010, partly because of the island's shortfall of natural gas. Another reason is gas-related, but not local to Trinidad.

Methanol production in Trinidad has declined each year since the curtailments began - down by 3% in 2010, by less than 1% in 2011, and by 9% in the first six months this year, according to data from the country's Central Bank.

Methanol exports have also declined, by 3% each year in 2010 and 2011 and by 9% in the first six months of 2012, the data show. Trinidad energy expert Kenneth Julien called the curtailments a crisis for the island's energy and petrochemical sector in a newspaper interview earlier this year.

The latest curtailment appeared in a press release from the government's energy ministry earlier this month, referring to "coordinated maintenance" that would be required of chemical producers so they would not suffer from the gas cutbacks.

The statement said Methanex and three other chemical producers had scheduled maintenance to coincide with work being done for 34-50 day periods on BP's Kapok and the British Gas (BG) Dolphin platforms extending to 23 October. BP and BG are Trinidad and Tobago's largest natural gas producers.

Anything more than a seasonal decline in the Caribbean country's production sends an alert to producers on the US Gulf Coast, which is the hub of the North American petrochemical industry.

GROWING COMPETITION
The message apparently has been getting through, because a recurrent trend in North American methanol since the gas curtailments began in 2010 has been growing competition from North America, where the shale gas boom in the US and parts of southwestern Canada have made the region a magnet for methanol projects.

For a quick roll call, Methanex restarted a plant in Canada at Medicine Hat, Alberta, in April 2011. OCI restarted a Texas plant in Beaumont in July this year. Those two plants alone have added 1.2m tonnes/year in new methanol capacity to the North American market, putting existing capacity at roughly 2m tonnes. That total is likely to double - and maybe triple - in the next three or four years if companies follow through with announced projects.

Houston methanol consultant Jim Jordan said at his annual conference from 11-13 September in Houston, Texas, that North American plant capacity will total 4.85m tonnes/year by 2016 if just the announced projects are completed, the largest being LyondellBasell's restart in Texas late next year, Methanex's move of a unit to Louisiana in 2014, and Celanese's construction of a new plant at its Clear Lake, Texas site in 2015.

If those projects get built, the US would not need to import methanol from Trinidad and would need maybe just one more decently-sized plant to cover all of its methanol imports, which in 2011 totalled 5.47m tonnes.

That plant may already be on the drawing board. Jordan showed a chart with half a dozen potential projects, some announced but lacking financial backing, and others unannounced.

TRIPLING OF CAPACITY
The consultant said if only half of these plants are built, there will be 7.85m tonnes of methanol capacity in the US by 2016 - or more than triple current capacity. One observer at the conference said the second group of projects - including a 1.65m tonnes/year project in Louisiana - should be classified as definite longshots. "Financing will not be given unless you can convince a finance company in this day and age that you have a market for it," the source said.

Whatever happens, methanol independence for the US appears within striking distance because of the shale boom. This is good for the US, of course, and maybe not so good for Trinidad. No exporter wants to lose its top customer. While lower gas prices have undoubtedly driven decisions to restart old plants and build new ones in the US, the curtailments to chemical producers at the Point Lisas Industrial Estate in Trinidad have put a damper on talk of new methanol projects there.

The proposed SABIC/Sinopec project announced earlier this year is a big example. Methanex Chairman Bruce Aitken in May discounted the chances of that project going ahead because methanol producers in Trinidad could not get enough gas to run their plants. Another deal involves the proposed sale of BP's ownership in the Atlas plant in Trinidad. Methanex owns more than 60% of that unit and at one point appeared ready to buy it, but the talk tailed off as the gas cutbacks continued.

And then there is Methanex's decision, made earlier this year, to move one of its idled units in Chile by ship to southern Louisiana by 2014. The company will transport the plant by ship, sailing past the two methanol plants it operates in Trinidad.


By: Lane Kelley
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