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February 2007 Headlines

Inventories are indicated as high in North America and Europe. Spot prices are adjusting down, but are not yet in a rapid decline. An outline of scheduled shutdowns shows the strongest drawdown in March/April. The impact of the total volumes lost is just beginning to be written off. Consumers have countered by scheduling derivative maintenance in the same period. The lost methanol volumes could slow the spot price drop, with new suppliers potentially offsetting, once the market enters the second quarter.

In his weekly radio address, Venezuela President Hugo Chavez recently detailed his intentions to nationalize all Orinoco River oil projects by 1 May 2007. Under the President's decree, state-owned Petroleos de Venezuela (PDVSA) will acquire a minimum of 60% control in four projects currently led by foreign companies, namely BP, Chevron, ExxonMobil, and Statoil. It is not yet known how the foreign companies will be compensated for the reductions in their stakes. Once this plan is complete, all of Venezuela's oil production will be nationalized.

Methanex Corporation announced that it had successfully secured additional natural gas feedstock to keep its Waitara methanol unit in New Zealand running through 2007. Labeling the unit a "flexible asset," the company has been maintaining operations at the location since August 2006 with short-term natural gas agreements. Total 2006 methanol production at this location was approximately 0.404 million mtpy, an increase of about 18% from the previous year.

Johnson Matthey Catalysts (JM) and Davy Process Technology announced this month that China's Baotou Shenhua Coal Chemicals Co. Ltd. have awarded them the methanol technology licensing, basic engineering and catalyst supply agreements for their coal-to-olefin (CTO) project in Inner Mongolia. Baotou Shenhua, a subsidiary of the Shenhua Group, will use methanol produced from coal to produce olefins through MTO technology. This will then be converted to polyethylene and polypropylene. While the company's proposed 1.8 million tonne methanol unit received approval from the Chinese government in 2005, the MTO project just got the nod in December 2006.

In February, Huntsman Corporation announced its intentions to sell its US Basic Chemicals and Polymers business to Koch Industries' subsidiary Flint Hills Resources (Wichita, Kansas). The deal, valued at approximately $761 million USD, includes the olefins and polymers production and businesses at five sites (Port Arthur, Odessa and Longview, Texas; Peru, Illinois; and Marysville, Michigan). The PO/MTBE business is not included in the agreement. Commenting on the pending sale, which is expected to close in Q3 2007, President and CEO Peter Huntsman noted that the deal would complete the company's "planned divestitures of its commodity petrochemical businesses and its transformation to a company manufacturing and marketing differentiated products."

Early this month, Dow announced that the sale of its interest in the Cabo, Brazil VAM unit to JB Group was finalized on 31 January 2007. Equipment, site-specific assets and staff will all be transferred to JB Group, however Dow will continue to serve as the local distributor of VAM output from the Cabo plant.

A consortium of nine companies, including Mitsubishi Gas Chemical (MGC), ITOCHU Corporation, Japan Petroleum Exploration Co., Ltd., Taiyo Oil Company, Limited, TOTAL Di-Methyl Ether Japan Ltd., Toyota Tsusho Corporation, JGC Corporation, Mitsubishi Heavy Industries, Ltd., and Mitsubishi Chemical Corporation, announced this month the establishment of a joint venture company to produce dimethyl ether (DME). The group intends to build a DME unit (80,000 MT/year, expandable to 100,000 MT/year) at MGC's Niigata, Japan location. Start-up is targeted for June 2008. MGC already operates a small DME facility at this location. JGC will handle the unit's construction, with MGC managing plant operations. The JV group will also work toward future commercialization through activities using DME from the unit in applications such as boilers, fuel cells, power plants, and automobiles.