Houston-based Yuhuang Chemical Industries Inc. (YCI) on Thursday clinched an agreement giving Koch Methanol Investments LLC a minority stake in YCI Methanol One LLC, a $1.85 billion production facility under construction in St. James Parish, LA.

Financial details were not disclosed, but under the agreement, Koch Methanol affiliates would receive offtake rights from the new facility, as well as construct, own and operate the methanol terminal assets for the outbound flow via marine, rail and truck logistics. YCI’s facility would be capable of producing 1.7 million metric tons/year (mmty) of methanol.

“The decision by Koch Methanol to invest in YCI Methanol sends a clear signal to the industry about the strength of this facility,” said YCI CEO Charlie Yao. “The new facility is located in a region with convenient access to natural gas, a highly skilled workforce, and world class transportation infrastructure, allowing us to be very competitive in our production and distribution. If viable, there is also sufficient land to add a second and third plant.”

The project, first announced four years ago, would encompass a complex on more than 1,200 acres near the Mississippi River.

Koch Methanol’s Jim Sorlie, senior vice president, said YCI, a subsidiary of China’s Shandong Yuhuang Chemical Co. Ltd., “has developed a strong execution plan for this project and we’ve been impressed with the knowledge and dedication of the team driving it forward.

“Our relationship with YCI will allow Koch Methanol to continue providing our customers with a consistent and low-cost supply” for U.S. and foreign markets “for years to come. Koch Methanol seeks to build long-term, mutually beneficial relationships and this investment is a good example of the opportunities we look for and we’re very excited to continue to build and grow this relationship.”

Supported by the syndication loan arranged and led by Bank of China, construction on the facility began in January 2017; commercial production is expected to begin in mid-2020. YCI’s funding agreement with the bank represented the largest Chinese-invested project in the Gulf Coast region.

Bank of China’s Raymond Qiao, executive vice president of the New York branch, said the plant “will create 100 permanent jobs, while construction of the facilities will result in 1,000 construction jobs.

The investment by Koch Methanol “adds more certainty to Yuhuang's project,” said Tudor, Pickering & Holt Co. (TPH) analysts. “However, the updated timeline of a mid-2020 start-up date is slightly behind our previous expectations of an early 2020 start.

“Given structural discounts in U.S. natural gas, there's no shortage of U.S. methanol projects on the docket.”

For example, Dutch fertilizer giant OCI NV subsidiary Natgasoline LLC is close to starting up its 1.75 mmty plant in Beaumont near Houston. US Methanol last year broke ground on a 200,000 metric ton/year plant in West Virginia that is set to ramp in early 2019.

In addition, Lake Charles Methanol LLC is looking at a 1.9 mmty plant starting up in Louisiana in 2021, and Methanex Corp. is nearing a final investment decision on a 1.8 mmty plant in Louisiana to start up in late 2022, according to TPH. In addition, Celanese Corp., which indicated four years ago it was considering a methanol complex in South Texas, “also mentioned an interest in additional methanol on its most recent conference call…

“Despite the new capacity, our global methanol supply/demand outlook is pretty balanced over the next five years,” TPH analysts said. “We project annual demand growth of 3.7%, which implies the world will need about 3 mmty of new capacity each year to simply match demand.”