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A Methanex methanol plant in Chile. (Methanex)
A Methanex methanol plant in Chile. (Methanex)

Shale gas boom spurs Methanex to move Chile plant to U.S. Add to ...

Vancouver-based Methanex Corp. is doubling-down on North America’s shale gas boom with plans to move a methanol plant from Chile to Louisiana to take advantage of this continent’s abundant supply and low cost of natural gas.

Methanex will begin moving equipment from a plant in Chile to Louisiana’s Gulf Coast in late spring and has signed a 10-year agreement with Chesapeake Energy Corp. to supply natural gas to the plant. Gas is a feedstock in the production of methanol, which is used in plastics, petrochemicals and transportation.

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Methanex CEO John Floren said he expects to move a second Chilean plant to Louisiana in coming years, although a final decision has not been made.

“If I had to make the decision today, I’d go forward with it but I don’t have to make that decision,” Mr. Floren said on a conference call with analysts Thursday. Asked what might prevent the move, he said: “It would have to be some major event that I can’t even imagine at the moment.”

Methanex, which has plants in six countries, is one of a growing number of petrochemical companies locating manufacturing facilities in North American to take advantage of the booming supplies and low cost of natural gas, which sells for one-third the price it fetches in Asia.

In 2010, Methanex reopened a mothballed plant in Medicine Hat, Alta., and recouped its investment in six months.

“We’ve become more and more … confident with the shale and tight gas revolution here in North America,” Mr. Floren said in a telephone interview. The company expects to expand its methanol production from five million tonnes a year to eight million in the next several years.

Chile is experiencing a shortage of the fuel that has forced Methanex to idle three of its four plants and take a $297-million (U.S.) writedown last year.

PricewaterhouseCoopers has forecast that the shale gas boom could result in one million jobs added to the manufacturing sector in the United States over the next decade, with North America poised to become a “major, global, low-cost provider of energy and feedstocks to the chemical industry.” Majors like Exxon Mobil Corp. and Royal Dutch Shell PLC have announced plans to expand basic chemical production using natural gas as a feedstock.

Debate is raging in the United States about whether the government should put limits on plans to build liquified natural gas facilities that would transform that country into a gas exporter from being a significant importer just a few years ago. An industry coalition of energy-consuming companies, such as Dow Chemical Co. and Hoechst Celanese Corp., argues that “unfettered” exports would drive up natural gas prices and rob U.S. manufacturers of a key advantage they enjoy against global competitors.

Mr. Floren said Methanex has no intention of getting involved in a political debate in the United States, adding that the company expects to pay off the capital cost of moving its Chile plants in less than four years, and that exports of LNG will not ramp up before then. But he said the 10-year supply deal with Chesapeake is critical insurance against an unexpected spike in gas prices down the road.

Methanex said it will cost $425-million (U.S.) to make the first plant move from Chile, and that it can reduce that cost by as much as $100-million for a second one.

Methanol has traditionally been used as a feedstock for the plastic and petrochemical industry, but increasingly it is being burned as a transportation fuel, either as a 15-per-cent blend with gasoline, or at 95-per-cent concentration.

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