Valero Energy Corp. plans to become a major player in the production of petrochemicals by building a $700 million methanol plant at its St. Charles refinery near New Orleans, a spokesman said Thursday.
Valero will take advantage of low-cost natural gas from shale formations such as the Eagle Ford to produce methanol, used to make a range of products such as plastics, textiles, solvents and paint.
Natural gas is used in the production of methanol.
The time is ripe for expansion into petrochemicals because the market for them is growing faster than the fuels market, Valero spokesman Bill Day said.
“This is the first thing we’ll build, but it probably won’t be the last,” he said.
Valero, the nation’s largest independent refiner, plans to sell the methanol it produces to “any of the big petrochemical companies or industries,” Day said.
Many petrochemical companies now must import methanol “so we could provide a domestic source, helping them push out imports,” he said.
The methanol plant, to be completed in late 2015 or early 2016, will produce 1.6 million tons per year.
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Because Valero has added two hydrogen units at its St. Charles plant that can be used to produce the methanol, the cost of building the plant is significantly reduced, Day said.
The hydrogen units were added at the plant as part of Valero’s $1.5 billion addition of a hydrocracker to boost production of diesel fuel, a high-margin product.
Valero now produces the petrochemicals benzene, toluene and xylene, but production from the planned methanol plant would dwarf the company’s present petrochemical production.
Last month, Valero completed a $413 million plant at the St. Charles refinery to produce renewable diesel fuel from fat, in a venture known as Diamond Green Diesel LLC.