Methanex wants to build another methanol plant in North America and has turned the site search into an “either/or” decision – either at Geismar, Louisiana, US or Medicine Hat, Alberta, Canada.
Both places are landmarks in the recent North American methanol boom, which like the ongoing ethylene and polyethylene (PE) plant booms, was spawned by the advent of fracking and the shale revolution.
The 2011 restart of Methanex’s existing plant in Medicine Hat led to other restarts, by LyondellBasell and OCI in Texas and Methanex in Louisiana, which led to new plants being built in the US. In 2015, Methanex started two 1m tonne/year plants in Geismar that were moved there from Chile.
But now Canada-based Methanex’s site search is showing that the advantage of cheap US natural gas – the edge cited so often for the wave of new US petrochemical plants being built – may not be enough to sway the world’s largest methanol producer to put a third new plant in Geismar.
A big difference between the two prospective sites is the cost of natural gas – “the biggest factor” in the site search, said Methanex Geismar plant manager Glynn Fontenot in his presentation to a Louisiana council in late February.
While the abundance of cheap American natural gas along the Gulf Coast would seem to put Geismar in an opportune location for the new plant, Fontenot said gas is a lot cheaper in Alberta. Comparing gas prices between the two regions, Fontenot cited the cost of natural gas in Geismar at $3.02/MMBtu.
“In Alberta, the price is actually about half that,” Fontenot said, citing an Alberta gas cost of $1.68/MMBtu.
Methanex spends $20m/month on natural gas for its two Louisiana plants, according to the company’s presentation in Ascension Parish.
In 2015, Methanex put the cost for moving and restarting the two Geismar plants at $1.4bn, but the company said adding a third new plant there could cost that much or more.
Methanex estimated the cost of a new 1.75m tonne/year plant at Geismar at $1.0bn-1.6bn. Adding a third plant in Geismar could turn into another moving project for Methanex because it still has an idle plant in Chile.
The recent presentation in Louisiana described the potential projects in Geismar and Medicine Hat as “brownfield” projects, which is industry parlance for expansion of existing sites. The existing Methanex plant in Medicine Hat has a capacity of 600,000 tonnes/year, less than half the size of the proposed new plant.
In 2013, Methanex said that it wanted to expand the Medicine Hat site with a new 1.3m tonne/year methanol plant and submitted plans to a Canadian governmental agency.
At that time, Methanex CEO John Floren said the new plant’s production would go to Asia and mainly China. That raises another big difference between the two proposed sites – shipping access.
The Canadian site is essentially landlocked, while Geismar is on the Mississippi River’s famed “chemical corridor”, a 170-mile (274km) stretch between Baton Rouge and New Orleans that is home to many petrochemical plants.
Shipping by water is usually cheaper than any other mode of transportation, though the trip to Asia from Louisiana – requiring a transit of the Panama Canal – usually takes a month and a half or more. Moving methanol from Medicine Hat to Asia would cut travel time from Geismar in half.
Another big factor in the contest for Methanex’s new plant will be tax incentives.
Local newspapers in Louisiana and Medicine Hat in recent weeks have estimated that Methanex wants $50m-100m in tax breaks for the Geismar unit, though the figures submitted to the Ascension Parish council were unclear because other governmental units are involved.
But a final decision by Methanex on where to put the new plant is some ways off. Officials in Louisiana said no final investment decision will be made until next year, with construction beginning in mid-2019 and plant start-up slated for 2023.
Floren told analysts in early February that Methanex would not be making any significant capital expenditure on new plants for the next 18 months, which would put a final investment decision no earlier than third quarter 2019.