11 January 2013 11:32 [Source: ICB]
Production could double or triple in the years ahead as a result of cheap gas and higher demand
The shale gas revolution has given companies the confidence to move methanol production to the US
Copyright: Chesapeake Energy Corporation
Plant restarts in Canada and Texas over the past two years, another one expected in late 2013 plus two or three more scheduled for 2014-2015 make it appear at least a decent bet that the US will not be importing any methanol by the end of the decade. Industry sources say another good bet is that methanol will continue to gain attention as an alternative fuel source or additive.
A report by US investment bank Raymond James said the global methanol demand growth outlook remains strong, underpinned by a series of new energy-based applications that include making gasoline from methanol.
The idea doesn't have much chance now in the US, but other countries see it as an option.
China is experimenting with methanol as a fuel blend, and Trinidad and Tobago recently said that Mitsubishi plans to build a plant on the Caribbean country that would convert methanol to di-methyl ether (DME), which would be used in Trinidad as a replacement or blending stock for diesel and liquified petroleum gas (LPG).
Whatever happens to methanol's popularity as a derivative, the petrochemical will most likely add more plant capacity in the US, which currently is around 2m tonnes/year.
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 estimates 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 in late 2013.
PRICE TURNING POINT?
A US methanol source said the restart of LyondellBasell's plant at Channelview in October could turn out to be a big price point for the year. "It will take about a month to get up and running, but that should bring down prices," he said.
One of the other announced projects, Methanex's move of a unit in Chile to Louisiana, will begin early in 2013, according to the company.
That move, according to Methanex senior vice president Michael MacDonald, is about solving the company's natural gas problem in Chile, at least for one plant.
"Rather than bringing gas to a plant in Chile, we're taking one of the plants to the gas," MacDonald said.
Unlike the energy situation in Chile, the shale gas and hydraulic fracturing revolution in North America has eliminated even the possibility of a scarcity scenario showing up in any company's crystal ball.
Methanex executives cite Energy Information Administration statistics showing almost 100 years of gas supply in the US, which gives them comfort in spending $550m (€418m) on moving a single plant from Chile to the US.
The Fitch Ratings credit ratings agency believes it likely that Methanex will relocate a second plant in Chile to Louisiana. Moving two plants to Geismar, near Baton Rouge, will cost about $1bn, Fitch said.
However costly, the move makes more sense for Methanex than to keep idle three of its four huge methanol plants in Chile. Fitch said just 21% of the company's plant capacity will be in Chile if two plants are moved to Louisiana, compared with 56% in 2009.
A methanol seller said traders and producers must continue to keep a close eye on supply alerts coming from Chile, Trinidad and Egypt, where Methanex also has a plant.
The seller added that methanol demand could pick up, based on recent economic news. "Demand for autos and housing could also dramatically increase," the seller said.
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