Methanex Corp. is moving closer to inking a long-term supply contract for its previously announced plan to relocate a large production plant to Louisiana, CEO Bruce Aitken told financial analysts recently.

Earlier this year, Vancouver, BC-based Methanex said it planned to relocate a $550 million methanol plant originally planned for Chile to Louisiana. The company is relocating to a 225-acre site in Geismar, LA, for its first U.S.-based production facility in more than a decade, another indicator of what shale and low gas prices have meant for major gas-related industries (see Daily GPI, July 30).

The plant is expected to employ 130 and create 996 indirect jobs. Methanex has expectations to complete the project in late 2014.

"We prefer to have a gas contract for sure," Aitken said. "And as I intimated, we're quite optimistic that we're going to have a gas contract. We had very good discussions with a number of gas suppliers, and I think there is an appetite out there, so that is part of the reason we feel quite positive about the opportunity to move the second plant [from southern Chile]."

Aitken said his company has been talking with "four or five different parties who we have made the most progress with" regarding contracts. "We're very close with one party, but there are several other conversations going on. No one in North America has signed long-term gas contracts for 20 or 30 years, and that is a long, long time." Aitken said Methanex could be "cutting edge" in developing long-term contracts in the current North American market.

He stressed the need for at least one long-term deal to support the Louisiana project. He wants to avoid "having too much methanol capacity tied to a spot price that moves every day. [That] feels a bit risky to me. So that's why we would like to have one contract and then that allows us to commit to move a second plant and then maybe we would get a second contract."

The projected North American supply-demand balance for natural gas makes it economic for Methanex to move one plant even without a long-term contract, but to move a second one would require a contract ideally, said the CEO.

Rather than a second plant in Louisiana, Aitken was asked if Methanex would be better off investing in an ammonia fertilizer plant in North America, and he said the company had "looked at that option" and decided it wouldn't be a good investment.

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