Methanex Awaits Right Conditions for North American Methanol Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Executives with methanol producer Methanex Corporation (NASDAQ:MEOH) (Vancouver, Canada) are hopeful that key conditions, including the price of methanol, will improve in order to proceed with two big plant projects, one in Geismar, Louisiana, and the other in Medicine Hat, Alberta.

"The Geismar 3 and the Medicine Hat 4 [addition projects] ... are both looking to be projects that are better than brownfield and much better than greenfield," Methanex Chief Executive Officer John Floren said during the company's recent third-quarter earnings conference call.

With a total investment value of $1 billion, construction of the Medicine Hat methanol unit addition could begin in second-quarter 2018, with completion in first-quarter 2018. The new unit would expand production capacity at the existing 600,000-metric-tonne-per-year facility by 1.3 million metric tonnes. Methanex has completed most pre-front-end-engineering-design (FEED) activities but has slowed design efforts due to the price margin outlook. Kick-off slippage so far has been 19 months beyond the month this project was originally planned to begin construction.

The company's proposed 900,000-metric-tonne-per-year Geismar 3 methanol unit project in Louisiana could begin construction in 2018, possibly the second quarter, with completion in May 2020. The project has seen 38 months of kickoff slippage.

Floren said there are "a number of different factors" in finalizing decisions on such projects. "It's just not methanol price, but we want to be in a position at the right time to execute on either or both of those projects and we still believe to construct plants in the North American environment today, you are talking $1,000 a tonne [construction cost per tonne of new annual capacity]."

He said the construction labor situation "is pretty tight in the US Gulf, [but] it looks to be a little better in Alberta."

The company was also awaiting news of whether the local government will grant natural gas royalty subsidies for the Medicine Hat project, Floren added. "We think our project is exactly the kind of project that the government was looking for to invest in."

Floren said Methanex may also seek a partner for the Medicine Hat operation.

"So those two projects will continue to work on and at the appropriate time and when we have all these boxes checked, we will execute."

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