With fuel supplied by abundant Lower 48 natural gas, Methanex Corp. has sanctioned a 1.8 million metric ton/year (mmty) methanol plant in Geismar, LA, adjacent to its two existing facilities.
Construction on the Geismar 3 (G3) plant, estimated to cost $1.4 billion, is to begin later this year, with operations targeted in the second half of 2022. The project’s total costs are estimated at $1.3-1.4 billion, including about $60 million of expenses incurred to date.
“Compared to a standalone U.S. Gulf greenfield plant, this project benefits from substantial capital and operating cost advantages, and we expect will deliver outstanding returns,” CEO John Floren said.
“As we have stated previously, we have a preference to have a strategic partner for the project and we will continue to pursue that option.”
Under a cooperation agreement earlier this year with M&G Investments, Methanex has retained an independent financial advisory firm to review the financing plan for the G3 project.
“Our long-term outlook for the methanol industry is very positive,” Floren said. “Demand forecasts for methanol are strong, and new capacity additions will be needed to meet expected demand growth.”
Methanex, considered the largest methanol producer in the world, has an estimated 14% of the global market. Methanol may be used as a marine or vehicle fuel, or as a power source. Estimated growth for new capacity has been forecast at 4 mmty, led by methanol-to-olefin and energy applications.
The new methanol project in Geismar is set to create 62 direct jobs with average salaries of $80,000. Louisiana Economic Development has estimated the project could result in another 300 indirect jobs.
Methanex has arranged committed financing for its sanctioned project. It also expects to access the debt capital markets in the second half of 2019 to pre-fund $250 million of Geismar 3’s 2020 expenditures.
Initial work is underway for another separate, 2 mmty methanol plant by South Louisiana Methanol and Saudi Arabia Basic Industries Corp. that could be sited in St. James Parish, LA, on the Mississippi River. The project, which if it were to move forward, could be the largest of its kind in North America.
Other methanol production plants also are on the drawing board in the Pacific Northwest, including NW Innovation Works’ plant at the Port of Kalama in Washington. Another facility is being constructed in the Appalachian Basin.
The Methanex project is coming at a “particularly soft time for methanol fundamentals,” according to Tudor, Pickering, Holt & Co. “Spot methanol prices in China (a likely destination for G3 exports) are currently down to $259/metric ton (minus 32% year/year), the lowest since 2016.”