Texas City contends for $4.5 billion methanol plant

Source: by Rhiannon Meyers, Fuel Fix • Posted: Thursday, July 24, 2014

Texas City is one of two Gulf Coast locations in the running for a $4.5 billion methanol manufacturing and exporting plant, a development that would mark the first such project in the coastal industrial town since the 1940s, officials said Tuesday.

A Chinese company last week agreed to lease 900 acres of land at Shoal Point, a former dredge spoils site with prime waterfront acreage south of the Texas City Dike, while it conducts a full environmental assessment of the undeveloped land.

At full capacity, the facility under consideration would produce 7.2 million tons of methanol each year for export to China, making it one of the largest such plants in the world, according to industry consultants.

If it comes to fruition, the project would be the most significant economic development in Galveston County in recent history, said Galveston County Economic Alliance CEO C.B. “Bix” Rathburn, who spoke on behalf of the company.

The deal is far from final. The company is expected to decide by next year whether to build the plant in Texas City or in Donaldsonville, La., on the Mississippi River about 65 miles west of New Orleans, Rathburn said in an interview with the Houston Chronicle.

“It would be a very big deal but I don’t want everybody getting too lathered up and then be disappointed,” Texas City Mayor Matt Doyle said in an interview. “But the end game could be very attractive for the city, the state and all of us down here on the Gulf Coast.”

Made from natural gas, methanol is used in a wide range of products, including plastics, paints, solvents, refrigerants and pigments. Other countries also use methanol as a replacement or an additive to gasoline, but the U.S. Environmental Protection Agency has not approved it as a transportation fuel.

Demand for methanol is rising in China, which has an exploding population and a booming economy, according to a study by petrochemical consultant Argus JJ&A, part of the international commodity reporting and consulting firm Argus.

Meanwhile, an abundance of cheap natural gas in the U.S., spurred by advances in horizontal drilling and hydraulic fracturing, has driven a wave of new petrochemical plants, particularly along the Gulf Coast and Mississippi River.

A Dutch fertilizer company in November announced plans to build what was then touted as the nation’s largest methanol plant, a $1 billion facility in Beaumont capable of producing 1.75 million tons of methanol per year.

The proposed Texas City plant is four times as large, with an estimated production as much as 10 percent of current world demand, said Dave McCaskill, vice president of methanol and derivative services for Argus Dewitt, another unit of Argus.

“This is really quite unprecedented,” McCaskill said.

While China makes much of its own methanol, it’s become cheaper for Chinese companies to build methanol plants from scratch in the United States and ship the fuel back, McCaskill said.

The renaissance in domestic methanol production is likely to propel the United States back to its once-dominant position as the leader in global methanol production and possibly prompt the country to rethink how it uses the fuel, McCaskill said.

Shoal Point is an attractive location because it has deep-water access necessary for supertankers, Rathburn said. The proposed development would include the construction of a new deep sea marine export terminal capable of simultaneously docking at least six 1,100-foot ships, according to the economic development alliance.

“It’s a tremendous piece of property with tremendous potential, especially for this business,” Rathburn said.

A Chinese company agreed in July 2014 to lease 900 acres of land at Shoal Point in Texas City, and will evaluate the site as possible location for a $4.5 billion methanol plant. (Chronicle)

Under the two-year lease agreements, the company has access to 300 acres owned by Texas City and 600 acres owned by the state of Texas to conduct feasibility studies needed for such an enormous project, Texas General Land Office spokesman Jim Suydam said.

To free up the land for the proposed methanol facility, Texas City last week terminated a long-standing lease with a terminal company that planned to develop Shoal Point, but never found a viable market for the property, Mayor Doyle said.