Methanex planning third US methanol unit in Louisiana

26 April 2018 20:45 Source:ICIS News

HOUSTON (ICIS)--Geismar, Louisiana appears to have won the bidding war staged earlier this year for Methanex’s new North American methanol plant.

The Canada-based producer’s top executive said on Thursday that Methanex has acquired land for a third methanol plant in Geismar, adjacent to its two existing methanol plants there.

CEO John Floren said in a conference call that Methanex is still probably a year away from making a final investment decision (FID).

Methanex site in Geismar Louisiana (Photo from Methanex)

In the first quarter, Methanex said it was considering two sites for a potential new plant, one in Geismar and the other in Medicine Hat, Alberta, where the company has an existing unit.

Both places are landmarks in the recent North American methanol boom, which like the ongoing ethylene and polyethylene (PE) plant booms, developed from the advent of fracking and the shale revolution.

Floren said one big advantage in the Geismar site is that it is easier to ship methanol from Louisiana to Asia than from Alberta, which requires moving it by rail to get it to a port for overseas shipment.

The Geismar site “seemed to have a little bit more advantage than Medicine Hat”, Floren said.

“It doesn’t mean that Medicine Hat is dead by any means,” Floren added. “We still think Medicine Hat is a great place to make methanol.”

Floren said the Alberta site had an advantage with the Canadian natural gas price being so much cheaper than the price in Louisiana.

A Methanex executive in March made that point in a presentation to a city council in Louisiana.

Comparing gas prices between the two regions, the executive said the cost then of natural gas in Geismar was $3.02/MMBtu. The executive said the price in Alberta then was about half that much, 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.

The proposed new plant would be a new-build unit with a capacity of 1.8m tonnnes/year, much larger than the two 1m tonne/year plants in Geismar now.

That means the Methanex unit would be slightly larger than the 1.75m tonne/year OCI Natgasoline plant in Beaumont, Texas that could be starting up in the next few months.

The larger size of what is being called Geismar 3 also means it could cost as much or more than the $1.4bn that Methanex paid to move Geismar 1 and Geismar 2 from Chile and restart those units in 2015.

In March, a Methanex executive told a town council in Louisiana that a new 1.75m tonne/year plant at Geismar would cost $1.0bn-1.6bn.

Floren did not want to talk about the total cost of the project, but he did say the company’s capital cost would be “minimal” because Methanex wants to find a partner to share the cost.

Floren said he’s seen studies on the cost of newbuild methanol plants in the US that show the cost now runs $1,100-1,200/tonne for a world-scale plant, because of the tight labour market in Louisiana.

Methanex wants to keep the capital cost of the project “way below $1,000/tonne”, Floren added.

Floren said it would take 9-12 months to get a FID on the project and that there would be no significant capital spent on the project until late 2019 or 2020.

Methanex’s cost would be minimal with a partner, Floren said.

“If we have a partner, we’re not going to need very much (capital),” Floren added.

Focus article by Lane Kelley

By Lane Kelley