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April 2007 Headlines

The high level of global methanol inventories noted in the various regional terminals in March are now beginning to adjust down, re-correcting slightly due to the impact of some recent maintenance, unplanned shutdowns and some demand recovery. In selected locations, demand is improving due to lower methanol costs and better growth entering the stronger spring period. There are still a number of derivative maintenance outages, specifically in Asia, impacting in May and June that could help hold the current balance. Some additional methanol maintenance is planned for the remainder of the current quarter. The Chinese import/export equation is slowly readjusting, with several new parcels noted for import.

Production disruptions at two large units in Iran are adding to market concerns, but large volumes are now being lifted from the new plant, which is running at reduced rates. Little direct impact has yet to be felt by the customers. In the Americas, Celanese Chemical has discontinued production at Edmonton, Canada, as anticipated. In Chile, Methanex has announced that the continued disruptions in gas supplies are resulting in reduced operating rates and inefficiencies, such that they will temporarily suspend production at a single unit. In turn, they will redirect all gas to the remaining facilities, maximizing operations and yielding almost the same level of methanol.

Due to continued natural gas delivery problems, labor disputes and infrastructure system repairs, the Methanol Chile production facilities ran at an average operating rate of about 79% during the first quarter 2007. This level of operation was only slightly better than the 81% rate in the fourth quarter of 2006. Methanex has indicated that the plants have improved to operating rates between 80-90% in the last few weeks. However, due to ongoing gas supply issues, they were taking down one unspecified unit at the site in order to maximize efficiency and production at the remaining units. The resulting lost methanol production volume will be negligible for an as yet undetermined period of time.

On 17 April, France's Air Liquide announced that it has agreed to purchase Lurgi from the GEA Group AG. The deal is quoted as having an equity value of €550 million, with an enterprise value of €200 million after including the assumption of Lurgi's cash position, pension and other liabilities. The move not only completes GEA's divestment of its plant engineering operations, it enlarges Air Liquide's technology portfolio to include hydrogen, synthesis gas, coal-to-liquid (CTL), coal-to-chemical (CTC), and biofuel production processes. The deal is pending approval from American and European antitrust agencies.

At mid-month, a major compressor failure forced National Petrochemical Company to take down the Fanavaran methanol unit in Iran. The plant is expected to be down until some time in June. Meanwhile, Iran's newest methanol plant, the Zagros facility, is said to be operating at a rate of 50-60%. Indications are that there may be a technical issue that could limit operating rates until further maintenance is performed. Parcels are loading out of the new unit, as product has already been shipped to India, Asia, China and Europe.

On 12 April, Mitsubishi Gas Chemical, ITOCHU Corporation and Brunei National Petroleum Company Sdn Bhd announced their finalized agreement to construct a methanol plant in Sungai Liang, Belait District, Brunei Darussalam. According to their statement, "all the required conditions for the joint venture project became satisfactory and the final investment decision was made under the consent of the above 3 shareholders." In a ceremony to commemorate the project, six agreements were signed, including a long-term natural gas sales and supply pact with Brunei Shell Petroleum Co. Sdn Bhd, as well as land lease, marketing, technical services, and catalyst supply agreements. The 850,000 mtpy unit will use Mitsubishi Methanol Process technology, with Mitsubishi Heavy Industries contracted to handle engineering, procurement and construction on a full turnkey lump sum basis. Funding for the estimated $400+ million USD methanol plant is being financed by a banking syndicate led by the Japan Bank for International Cooperation (JBIC) on a limited recourse "Project Finance" basis. Construction is slated to be complete by the end of 2009, with start-up targeted for Q2 2010.

On 10 April, the US Environmental Protection Agency issued their final rule on the Renewable Fuel Standard (RFS). Under the program, an equivalent of at least 7.5 gallons of renewable fuel must be blended into the nation's gasoline pool by 2012. Refiners, blenders and importers are required to use a minimum volume between 2007 and 2012, with the percentage increasing every year. The requirement will be based on the percentage of a company's total fuel production or imports. For 2007, the EPA had issued an interim percentage of 4.02, until it could formalize a final rule. Commenting on the EPA's ruling, the Methanol Institute noted that biodiesel has a renewable credit of 1.5, while ethanol has a credit of 1.0, this based on the BTU content of these products, giving biodiesel producers a 50% boost in credits over ethanol.

Technip announced it has been granted the engineering, procurement and construction management (EPC) contract for the BP-YPC Acetyls unit to be built in Nanjing, China. The 500,000 mtpy acetic acid unit will use BP's Cativa® technology. The facility is scheduled to come online in the first half of 2009. Technip had previously performed front-end engineering design on the project.

On 27 April, the California Air Resources Board (CARB) announced new, stricter formaldehyde emission regulations for all composite wood products, specifically hardwood plywood, particleboard and medium density fiberboard (MDF). Phase 1 of the new emission limits, effective in 2009, will bring the state in line with current regulations being enforced in Europe and Japan. Phase 2, effective in 2011 for most products and 2012 for the remainder, could make California the strictest regulator in the world. Compliance to the new limits will be enforced through a certification program, in which manufacturers, distributors, contractors, and importers must have their products tested by a CARB-approved, "third party" lab. Acceptable product would then be labeled as meeting the formaldehyde emission requirements and allowed for sale in the state.