Natural gas boom spurs methanol rush

HOUSTON — The natural gas boom has turned the United States into a magnet for production of methanol, with nine major plants expected to be built, expanded or restarted in the country in the coming years.

LydondellBasell announced Thursday that it had completed the restart of a plant that it had shut down for a decade because of previously high natural gas prices. Celanese said Friday that it had received federal approval to build an $800 million methanol plant at its chemical complex in Clear Lake, Texas.

The announcements came weeks after a Dutch company announced plans to build a more than $1 billion methanol plant in Beaumont, Texas, and as several other chemical businesses continue projects to make more methanol in the United States.

The shift will multiply the nation’s capacity to produce methanol by more than 12 times, from 860,000 tons per year in 2011 to a record 10.5 million tons per year by 2018, according to data from IHS Chemical.

Valero is considering adding to the mix, evaluating a plan for a $700 million methanol plant at its refinery in St. Charles Parish, Louisiana, spokesman Bill Day said. Methanex is in the process of disassembling a methanol plant in Chile and relocating it in Geismar, Louisiana.

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Low natural gas prices are driving the interest in methanol plants.

“Because natural gas is so inexpensive here along the Gulf Coast and natural gas is the basic building block for petrochemicals like methanol, it makes more economic sense to start manufacturing products like that here rather than having it done overseas,” Day said.

LyondellBasell spent about $150 million to upgrade and restart its methanol plant in Channelview, Texas, but the company anticipates it will earn a sizable annual profit from the site because of low natural gas costs. The company expects to pull in at least $130 million in annual earnings before interest, taxes, depreciation and amortization from the site.

Lower costs

Methanol, which can be made from natural gas or coal, is a chemical that can be used to make products like acetic acid and formaldehyde, said Dewey Johnson, vice president of base chemicals and plastics research for IHS Chemical.

Formaldehyde is used in building products like plywood or in foam for household appliances, Johnson said. Acetic acid is used in paints, coatings, plastic resins and adhesives, among other products, he said.

When natural gas prices rose a decade ago to more than $8 per million British thermal units, methanol plants in the United States became uneconomic and companies shut down their facilities, Johnson said. Chemical companies began importing more methanol from South America and the Middle East, among other sources, he said.

Natural gas prices are now expected to remain around $4 per million British thermal units through 2030, according to IHS CERA.

That has been inspiration enough for several companies to invest in methanol production in the United States.

World market

Two of the nine projects expected to be restarted, built or expanded in the United States by 2018 have already started up, Johnson said.

“There will be ultimately more built than the use market needs to consume and we anticipate it will be exported,” he said.

The United States currently consumes about 6.5 million tons of methanol per year, Johnson said.

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Despite the expected growth in U.S. methanol production, the country will still lag far behind the world’s largest methanol producer. China has the capacity to make 55 million tons of methanol per year, although it currently uses only half of that capacity, Johnson said. China’s methanol is made primarily from coal and some of the country’s aging plants are too costly to run, he said.

The benefit to the United States will still be substantial, however, with more companies investing in plants that will use domestic natural gas, Johnson said.

“It will significantly add to employment as we see more production moving back into the U.S. in the chemical space,” he said.