The nation’s shale gas revolution is often touted as the quickest route to oil independence for the country.
But natural gas, pumped from shale plays that include the Eagle Ford in South Texas, also is spurring billion-dollar investments in the petrochemical industry, including big-dollar spending to make methanol.
While not a household word, methanol nevertheless is almost everywhere. It’s used to make paints, carpet, particle board, plastic bottles, plywood flooring, de-icing agents, car parts and even Polar fleece clothing.
Petrochemical manufacturers need methanol, but little has been produced in the United States in the last decade. That’s about to change.
Because most methanol is produced from methane found in natural gas, the historically low price of natural gas is reviving the once-moribund methanol industry in North America.
Now, at least nine methanol plants are planned, said analysts at Platts, which provides energy and petrochemical information.
As recently as Nov. 21, Dutch fertilizer company OCI N.V. said it would build the nation’s largest methanol plant in Beaumont at a cost of $1 billion.
The plant is expected to produce about 1.75 million tons of methanol a year. OCI already owns another methanol plant in Beaumont that had been closed when the company bought it two years ago.
San Antonio-based Valero Energy Corp. said in July that it may spend $700 million to build a methanol plant at its St. Charles refinery near New Orleans. The project would produce 1.6 million tons of methanol a year, the size of a world-scale plant.
Vancouver, Canada-based Methanex Corp., the world’s biggest supplier of methanol, announced earlier this year that it would dismantle two methanol plants in Chile and move them to a site south of Baton Rouge. Total investment: $1.1 billion, the company said.
And Dallas-based Celanese Corp. said in May it would join Tokyo’s Mitsui & Co. Ltd. to produce 1.3 million tons of methanol a year by 2015 at Celanese’s plant in Clear Lake.
Companies planning to build methanol plants have been clear about the reason: abundant natural gas that’s now priced below $4 per mm Btu.
“The term game-changer is thrown out there all the time,” said Kevin Swift, chief economist at the American Chemistry Council, an industry trade group. Low natural gas prices represent “the greatest thing that’s happened in this industry in 75 or 80 years, going back to when nylon was developed.”
Natural gas is the biggest cost component in the making of methanol, “and now the U.S. is the place to manufacture it,” Swift said. “We’ll have the advantage of having some of the lowest-cost methanol in the world.”
That is expected to filter through many industries that buy methanol, including the construction industry, plywood manufacturers and makers of a range of consumer products.
In North America, methanol production reached about 10 to 11 million tons per year in the mid- to late 1990s, said Colleen Barry-Goodman, associate editor for Americas Petrochemicals at Platts.
But in mid-2008, the price of natural gas spiked above $8 per million British thermal units, and at one point the price zoomed to $12 per million Btu for a short time.
“It simply wasn’t cost-effective to produce the material here,” she said, and production shifted to other parts of the globe. “From about 2008 to 2012, there was only one methanol facility in the United States and one in Canada.”
In 2012, the United States had slightly more than 1 million tons of methanol capacity, said Mike Nash, global director of Syngas Chemicals at IHS Chemical, a part of the analytics and consulting firm IHS Inc.
There has been a deficit in domestic methanol production for years, Nash said, but by 2018, IHS is predicting that the nation will have the ability to produce at least 10 million tons.
“That gives you an idea of the kind of scale of the transformation,” Nash said. “It’s a smart market to go into, and returns over the last few years have been very attractive.”
“Methanol is a pretty versatile chemical,” Nash added, including its possible use as a blending agent in gasoline and in biodiesel. While methanol isn’t blended with gasoline in the United States, it is in China.
“There are emerging markets for it — quite fast-growing — and end uses for methanol that 10 to 15 years ago just didn’t exist,” Nash said.
Companies that build methanol plants first “are going to be the ones to reap the benefits,” said Bernardo Fallas, editor for Americas Petrochemicals at Platts, a division of McGraw Hill Financial.
The building of methanol plants could be slowed, however, because companies will be competing for contractors and skilled labor, Fallas said. There are already reports that skilled labor is in short supply.
After five or six plants are built, the demand for natural gas rises and there’s more methanol in the marketplace, “that could pressure prices more,” Fallas said, “and margins could narrow.”
“The price is going to go up, and petrochemical plants by themselves are expensive because they’re very complicated,” Fallas said.
While the Gulf Coast states generally welcome petrochemical plants, building still requires permits. And there could be environmental challenges, Fallas said.
Should Valero decide to build a methanol plant, it could be completed quicker than a grassroots project, Valero spokesman Bill Day said. That’s because Valero “has the necessary hydrogen-making capacity” at its St. Charles refinery. Hydrogen is an element of methanol.
The demand for petrochemicals “is growing more than demand for transportation fuels,” Day said, “which is why we’re studying projects like the methanol plant.”
The Houston Chronicle contributed to this report. ___