Local Methanol Project May Be the Start of Something Much Bigger

By Erik Olson, January 25, 2014, Longview Daily News


Could the Pacific Northwest become the nation’s newest pipeline for methanol production and export?


Chinese-backed Northwest Innovation Works has already proposed two mega-methanol plants at the Port of Kalama and Port Westward near Clatskanie, and analysts say export demand is big enough to support three or four times that number.


Additionally, methanol’s biggest consumer, China, is desperate for a new supply. Its factories are clouding the air by burning coal to make methanol, opening the door for U.S. manufacturers to make it with cleaner, less expensive natural gas.


In fact, Northwest Innovation officials say they’re considering building three more plants on the West Coast to meet China’s skyrocketing demand. They say the region has easy access to export docks and pipelines connecting to the natural gas fields of Canada and the Rocky Mountain region.


“Other ports may still have the opportunity to get involved,” Murray “Vee” Godley, Northwest Innovation’s president, said Wednesday in a meeting at The Daily News.


Northwest Innovation last week announced its plans to spend $3.6 billion to build two phases of each plant at Kalama and Clatskanie. Each plant would have 240 full-time employees at full build-out, and the company hopes to start operation in 2018. Combined, the facilities would produce 10,000 metric tons of methanol daily by burning 640 million cubic feet of natural gas.


The plants would convert natural gas into methanol, a liquid that dissolves easily in water and has been manufactured in the United State for decades. It’s used to make olefin, a key component in the manufacture of plastics.


Northwest Innovation officials have so far declined to identify where else they might build. One place with enough space is the Barlow Point industrial park owned by the Port of Longview, which has 375 acres of open land. However, Longview port officials said last week they need to spend about $11.15 million to develop the property to attract business. They didn’t bid for the methanol plants.


Northwest Innovation hopes to start construction of its two plants next year, and analysts say they expect other companies are considering new facilities to meet demand.


China is expected to consume half the worldwide production of methanol this year, about 32 million tons, according to analyst firm IHS Global. Demand from China alone is expected to triple by 2022 to meet consumer demand for plastics, laminates and everyday products that contain methanol. Analysts say China doesn’t have the methanol manufacturing capacity to keep up. It’s trying to transition away from burning coal, but the alternative, natural gas, is scarcer and more expensive.


“Suddenly, (the United States) is now thrown back into the mix as a contender,” analyst Marc Laughlin of Houston-based IHS Chemical said.


Most U.S. methanol plants are along the Gulf Coasts of Texas and Louisiana, where natural gas has traditionally been inexpensive. Those plants mostly supplied the domestic market. In the early 2000s, several factories closed because they couldn’t afford rising natural gas prices, but they re-opening now that prices have fallen and export demand for methanol has risen.


However, the Pacific Northwest is in a better geographical position to supply China’s demands, Laughlin said. If Northwest Innovation can obtain the necessary building permits from the notoriously strict Washington and Oregon state governments, he said he believes it will succeed.


“When I heard of this project, I thought it was great, if they can pull it off,” he said.


Despite recent natural gas price spikes because of a recent cold snap on the East Coast, analysts project natural gas will remain relatively cheap for years to come. Methanol production would represent a tiny fraction of overall consumption, even with new manufacturing plants, and is unlikely to force consumers to pay more for heat, according to Laughlin.



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