Canada methanol project canceled in first quarter 2023 amid lackluster demand

One of the biggest projects in terms of required investment promoted in recent years in Canada, the estimated C$4 billion Nauticol plant in the Alberta province, was canceled in February 2023 as demand for the commodity used as fuel, intermediate for other chemicals, and feedstock was relatively lackluster.

Net Zero Voyage Geismar 1 - Image courtesy of Methanex

“The project was cancelled on February 7, 2023,” according to information provided by the Alberta government website.

The Grande Prairie Nauticol Energy Blue Methanol project was to produce 3.4 million metric tonnes of what it described as blue methanol annually, while supporting 5,000 construction jobs, and 1,260 permanent direct and indirect jobs, it added.

Blue methanol can result from the use of carbon capture technologies to reduce carbon dioxide emissions. Green methanol involves the use of renewable electricity or production from biomass.

Global methanol demand increased “slightly” in 2022 compared with the previous year but the demand softened in the last quarter of the year, according to estimates from a top industry executive.

Geismar 3 to be completed in 2023

While Nauticol canceled its methanol project, the world´s top producer of methanol, Canada-based Methanex, plans to complete its project called Geismar 3, a new and its third methanol plant in Louisiana, in 2023.

The Geismar 3 project, budgeted at $1.25-1.3 billion,according to the company, is expected to have annual production capacity of 1.8 million tonnes of methanol.

Methanex’s global supply chain includes an annual production capacity of 2.2 million tonnes of methanol from its Geismar 1 and Geismar 2 plants, operational since 2015.

The Geismar 3 plant coming online this year, “will further enhance our cash generation capability,” said Rich Sumner, CEO of Methanex, on Feb. 3, discussing fourth quarter earnings.

Global methanol demand increased slightly in 2022 to 88 million tons, according to information shared during the call.

“Methanol demand in the fourth quarter was down approximately 5% compared to the third quarter of 2022, primarily driven by lower MTO operating rates,” Sumner added.

MTO refers to methanol-to-olefins uses related to polymer production.

As for the Nauticol project, while Canadian press mentioned Covid as a reason why the project wasn’t developed, citing the company, analysts had anticipated challenges back in 2019.

Methanol as shipping fuel instead of diesel

“Interest from the green industry and orders for dual fuel vessels able to run on methanol continue to grow. Based on existing dual fuel ships and orders to date, demand potential grows from approximately 300,000 tons today to 3 million tons over the next few years,” Sumner estimated.

Several companies have made announcements related to use of methanol as fuel to replace bunker of diesel.

An analyst said there is interest in the shipping industry for the type of methanol that would help it reduce its carbon footprint compared with diesel.

“Methanol is an option however what the companies are looking for is the greener version of methanol,” said in March during an interview Esteban Sagel, a consultant specialized in polymers and based in the U.S.

“Methanol from natural gas may not do exactly what they are intending to do in terms of reducing the environmental footprint” unless the companies are able to tap the green or blue methanol.

Methanex efforts to produce green methanol

Sumner, CEO of Methanex, said his company is looking at meeting the demand for the greener versions of methanol.

“So, we're certified in North America in our Geismar plants and we're active in the renewable natural gas market where we buy renewable gas at a premium and create green methanol and supportive of downstream customers."

When it comes to investments, we're looking at the feasibility of carbon capture in the U.S.,” he said.

Methanol growth “moderate”

There will be “moderate” growth for methanol in coming years, according to data shared by market intelligence platform IndexBox on Dec. 2, 2022.

The global methanol market is projected to reach just over $25 billion by 2030 from just under $21 billion in 2021, at an annual growth rate of just over 2%, according to a press release from Indexbox, a market research firm with offices in California.

“The increase in demand for methanol can be attributed to the growing construction and automotive industries in Asia-Pacific and the Middle East & Africa,” it said.

Methanol, the simplest alcohol and also known as wood alcohol, is a key ingredient in many industrial chemicals and can be produced by dehydrogenating methane, or by hydrogenation of carbon monoxide, as well as from biomass not just from wood but from any agricultural waste, according to Indexbox.

“Today, methanol is primarily produced from natural gas, but can also be derived from coal or renewable sources such as biomass. It is an important feedstock in the chemical industry and is used to produce a variety of products including formaldehyde, acetic acid, and methyl tert-butyl ether (MTBE).

Methanol is used in a variety of applications such as formaldehyde, acetic acid, MTBE, solvents, biodiesel, and others. Formaldehyde was the largest application segment of the global methanol market and may maintain its position, it said. The solvents application segment is expected to witness the highest growth rate during the forecast period.

The major players operating in the global methanol market include Methanex  (Canada), BASF, Shell, Celanese, CNPC, Sasol, Sabic, Indian Oil Corp., ExxonMobil Chemical, Taiwan Methanol Co., Hanwha Chemical Corporation of South Korea, among others.

“The key drivers of the global methanol market include the growing demand for methanol-based chemicals, the expansion of the automotive industry, and the increasing use of methanol as a transportation fuel,” according to the report.

“Methanol is also used as a transportation fuel due to its high octane number and low carbon emissions. The automotive industry is one of the major consumers of methanol, which is used as an additive in gasoline and as a fuel for race cars,” according to the press release.

Construction is a major consumer of methanol, used as solvent in paint strippers and to clean concrete cleaners, as well as in laminated wood.

“Methanol demand has been declining in key markets such as the U.S. and Europe due to the economic slowdown and the shift to cleaner-burning fuels. This has led to excess capacity and further price pressures in the market,” according to the press release.

“Methanol is a highly corrosive substance, which can pose problems for storage and transportation,” added IndexBox.

By Renzo Pipoli