Price and market trends: US methanol projects face labour shortage, high costs - Methanex

07 February 2014 10:14 Source:ICIS Chemical Business

Labour shortages and high costs to affect new plants

Because of the boom in new methanol plant announcements in the US, building them will be tough because of a looming labour shortage and the high cost of such projects, Methanex chief executive John Floren said on 30 January.

In a conference call, Floren said he has seen studies projecting a labour shortage in the US of 30% in skilled trades later this year. Floren said costs reaching as high as $1,000/tonne for new projects will make it hard to get a decent return on investment.

 Methanex moved its largest module to be placed in Geismar

Copyright:  Methanex

“I think we’re going to be in a very difficult environment for new-build projects,” Floren said.

Methanex is in the process of moving two idled plants from Chile to the US Gulf Coast, with one of the plants fully delivered to the site in Geismar, Louisiana. That unit is scheduled to start up this year, though Floren described the start date as “later this year at the earliest”.

For its second Chile unit, also going to Geismar, Methanex projects a startup in early 2016.

Floren said the company does not have a natural gas contract yet for the second Geismar plant. Methanex announced a contract for the first Louisiana plant in early 2013. However, Floren said he is not worried at this point, even with gas prices shooting up above $5/MMBtu in January, which he attributed to the severe winter.

“If you had a cold winter like we’ve had, in previous years you would see $15/gas [per MMBtu], so the fact that we haven’t seen a run-up to more than $5 reinforces our impression that gas is readily available and people can make a profit at $4-6 (MMBtu).”

Natural gas problem
The major impetus for the resurgence of the US methanol industry is cheap natural gas from the shale boom. Mid-day prices for Henry Hub natural gas ran around $5.05/MMBtu, down from a high of $5.48 earlier that week.

Natural gas supplies in Trinidad have been a problem for Methanex, which operates two units at the Point Lisas Industrial Estate there.

Floren confirmed reports that Trinidad’s state-owned utility in January has been curtailing supplies for Methanex and other methanol producers there, though he did not give any specifics.

“We continue to experience curtailments,” Floren said, adding that the country’s energy minister said that the reductions would stop this year. “We do expect 2014 to be better than 2013.”

Methanol and ammonia producers in Trinidad have experienced numerous cutbacks in their gas supplies over the past few years because of repairs being made to offshore platforms.

By Lane Kelley