Yuhuang eyes market leadership with Louisiana methanol project

Yuhuang Chemical Inc. (YCI) aims to become one of the biggest methanol producers in the United States when it builds its greenfield methanol project in Louisiana, Jerry Oliver, YCI’s vice president of Manufacturing Operations, said during the Petrochemical Engineering & Construction conference on June 8.

The world-scale project will entail three phases, with construction on the first phase expected to begin in Q4 2016 at the company’s 1,300-acre site in St. James Parish, Louisiana, Oliver said.

Speaking on the second day of the conference, Oliver discussed the key drivers for locating a plant in the U.S. and Louisiana, as well as the long-term vision and path for the company moving forward.

YCI, the North American subsidiary of Chinese chemical producer Shandong Yuhuang Chemical (Group) Co., Ltd (SYCC), picked the location after throughly evaluating 14 tracks of land in Texas and Louisiana and previously deciding between the Middle East and the United States. Louisiana's business-oriented environment, good tax and employment incentives, as well as its experienced local workforce turned to be the key differentiator, Oliver said.

However, on Day 1 of the conference, Dan Borne, president of the Louisiana Chemical Association, said that there has been a change in business climate in Louisiana in the last 6-9 months - including additional taxes on capital-intensive industries - that will affect future investments in the state. Some $140 billion in industrial investment has been announced in Lousiana since 2012,  but less than half —$65 billion — has broken ground, according to Borne.

“We are building for the long term. We are building with a strategic view, developing a chemical company in the United States,” Oliver said.

When the first phase of the St. James Parish project begins commercial operations in early 2019, it will have an initial production capacity of 4,900-5,000 metric tons a day, or about 1.7 million metric tons per year (mtpa).

After the first methanol plant is completed, Yuhuang plans to continue to execute its multi-phase strategy of monetizing low-cost natural gas as methanol, developing the 1,300-acre site into a world-class chemical manufacturing complex.

The second phase will duplicate the first and will follow immediately, Oliver said. Following the start of production on the second facility, YCI also plans to begin construction on a methanol derivatives plant on site (third phase).

Methanol opportunity

About 50% of the methanol produced by the first phase of the project will likely be shipped by river and railroad and sold to North American customers, with the remaining 50% expected to be exported, where some of it will be bought by SYCC.

Besides YCI’s project, three planned methanol projects totaling about 4.97 million tons of new capacity — Natgasoline’s 1.75 mtpa project in Texas, G2X Energy’s 1.4 mtpa facility in Louisiana, South Louisiana Methanol’s 1.92 mtpa plant in Louisiana — are expected to begin production in the next four years out of a total of 15 announced facilities.

Overall, there are about 30 million metric tons of proposed new methanol capacity in the U.S. between 2016 and 2020 – mostly large-scale projects – with about 7 million tons of those likely to go ahead, according to Petrochemical Update estimates.

Much of the announced new capacity will be used in methanol-to-olefins (MTO) plants – mainly in China – which directly convert methanol into ethylene, propylene and derivatives such as or polyethylene and polypropylene.

Oliver said he expects methanol will be a “growth commodity globally and over the long term,” especially as China is adding more methanol into its motor fuel pool and is building a number of methanol-to-olefins (MTO) plants on its coast.

Though most of the new units will serve domestic demand in the short term, limited regional demand growth for methanol - especially given that there is no MTO in the US and fuel applications remain small - means that North America will become a net exporter of methanol in early 2019, based on the pipeline of announced projects and demand forecasts.

“The U.S. consumes around 8 mtpa of methanol and China and the rest of the world an order of magnitude more,” Oliver said.

“If we produce 4,000-5,000 metric tons out of our plant and do that up to 15,000 over the next 10 years, we will be a major player in the US. The idea is to be a major player, not just to be a single-plant player.”

Project at a glance

The front-end engineering and design (FEED) on the project was completed in early 2015 and detailed engineering is more than 30% complete, Oliver said.

The engineering, procurement and construction (EPC) contract for the project has been awarded to Amec Foster Wheeler, and YCI has secured land, land use and air permits, as well as a Cooperative Endeavor and Tax Incentive agreements with the State of Louisiana.

YCI has also signed a license agreement with Air Liquide, which will provide oxygen for the Megamethanol Plant. According to Oliver, Air Liquide has 14 licenses of this size planned around the globe, allowing YCI to use experience from elsewhere in the world, Oliver said.

YCI has also closed a firm gas transportation agreement with Transco, which will deliver natural gas feedstock to the St. James Parish site via two 30-inch natural gas pipelines.

The site’s proximity to the Mississippi River allows YCI to also run barges and ships up to Panamax size, Oliver said, allowing the company to move methanol to both the domestic and global markets. The site is also connected to a major transmission line and a UP rail line.

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