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Shale-Gas Boom Spurs Chilean Methanol Plant’s Move to U.S.

Jan. 18 (Bloomberg) -- Methanex Corp., the world’s biggest methanol maker, plans to dismantle an idled Chilean factory and ship it to Louisiana where it will be reassembled to capitalize on the lowest U.S. natural-gas prices in almost a decade.

Engineering at the new site in Geismar has begun and the plant should be operational in the second half of 2014, the Vancouver-based company said yesterday in a statement. Methanex is developing cost estimates for the project and will make a final investment decision in the third quarter, Jason Chesko, a spokesman for Methanex, said today by telephone.

Relocation is cheaper and faster than building a new factory, Chief Executive Officer Bruce Aitken said in the statement. Gas futures on the New York Mercantile Exchange closed today at their lowest since March 2002. Producers are using hydraulic fracturing and horizontal drilling to tap deposits in shale rock from the U.S. northeast as far west as the Rocky Mountains to supply the Gulf region.

“The outlook for low North American natural-gas prices makes Louisiana an attractive location,” Aitken said.

Reassembling the plant will employ more than 1,000 people in Louisiana, and as many as 200 skilled workers will be needed to operate the factory, Chesko said. Methanex expects “substantial savings” compared with the $700 million cost of a new plant, he said. The factory would generate about $400 million in annual sales at current methanol prices, Chesko said.

Cracker Construction

Methanex turns methane, a gas component, into methanol, an ingredient in formaldehyde, polyester and plastic bottles. It’s among more than a dozen chemical makers expanding in the U.S. to take advantage of gas prices.

Chevron Phillips Chemical Co. plans to spend about $5 billion to build an ethane cracker in Texas, while Dow Chemical Co. and Sasol Ltd. each plan to spend as much as $4.5 billion on crackers in Louisiana. Crackers are plants that turn ethane, another component of gas, into ethylene, a plastics ingredient.

Methanex probably is preparing the Geismar site to accommodate a second plant from Chile, Charles Neivert, an analyst at Dahlman Rose & Co. in New York who rates the shares “buy,” said today in a note.

Chesko said Methanex’s site near Punta Arenas in southern Chile has four methanol plants and “there is potential later” for another unit to be moved to the U.S. The plant that will be shipped was built in 1996 and can make 1 million tons of methanol a year, the spokesman said.

New Zealand Restart

The Chilean factories were idled after the company lost its gas supply from Argentina in 2007, Chesko said.

Methanex also is restarting a second methanol plant in New Zealand, with production to begin midyear, the company said in a separate statement. Earnings from the relocated Chilean plant and the New Zealand restart may add about $18.50 to Methanex’s share price, Hassan Ahmed, a New York-based analyst at Alembic Global Advisors who rates the shares “overweight,” said in a note today.

Methanex rose 3.5 percent to C$27.80 in Toronto. The shares have gained 19 percent this year.

To contact the reporter on this story: Jack Kaskey in Houston at

To contact the editor responsible for this story: Simon Casey at

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