A lack of methanol capacity in the mid-1990s could led to shortages and limit production of methyl tertiary butyl ether, warns Abdullah Nojaidi, president of Sabic Marketing Ltd.
He estimates world methanol demand will rise by about 5.6%/year in 1991-2000 fed by a jump of at least 20% in demand for MTBE. These averages are deceptive, he said, because demand will explode in 1992-93.
"We are going to need every available gallon of methanol capacity to control pollution in the U.S., western and eastern Europe, Japan, and Asia...Unfortunately, new plants require long lead times, and those who want to see the right returns in advance are unlikely to have plants in place when demand starts to rise sharply in 1992 and 1993."
SABIC'S ROLE
Sabic is a major methanol and MTBE producer and marketer with 1.8 million metric tons of methanol capacity at three plants in Saudi Arabia and Bahrain. It will add another 630,000 tons of capacity early this year with completion of an expansion at Saudi Methanol Co. to 1.2 million tons/year. Saudi Methanol is a 50-50 joint venture of Sabic and a Japanese group headed by Mitsubishi Gas Chemical Co. Sabic has a 70% stake in Saudi European Petrochemical Co.'s 500,000 ton/year MTBE plant at Jubail, with other interests held by partners Neste Oy, Enichem Corp., and Apicorp.
Sabic, also one of the world's largest merchant suppliers of MTBE, plans to add another 1.4 million tons/year of MTBE capacity by 1993.
MTBE OUTLOOK
Nojaidi estimated 30-40% of all U.S. gasoline will have to be oxygenated when Clean Air Act rules governing oxygen levels of gasoline in certain areas take effect in late 1992.
"The huge amount of oxygenates required could drain virtually all existing U.S. MTBE and ethanol capacity. The boom that is set to occur in the U.S. will be great enough to impact every world MTBE and methanol producer."
Nojaidi said the U.S. imports, in addition to MTBE supplies, 30% of the methanol and butane it needs to produce MTBE. While other oxygenates could bear some of the load, the U.S. appears certain to import more MTBE and methanol in the future, he said.
"The situation begins to look worrisome if we assume other countries will follow the U.S. lead and compel refiners to use more oxygenates."
Elsewhere, Nojaidi said, MTBE as an octane additive to replace lead will continue to grow in western Europe and Asia-outside Japan and Taiwan.
MTBE is being used to reduce pollution in Mexico City, Japan has approved use of as much as 7 vol % MTBE in gasoline, and Pakistan has taken steps to introduce MTBE into its gasoline pool.
LACK OF VISION?
Methanol producers are not keeping up with MTBE demand, which shows lack of vision about methanol's future, Nojaidi contends.
Companies are hesitant about building new plants for several reasons, including poor plant performance in the 1980s and the fear of overcapacity.
Bankers, he said, are unwilling to finance new capacity without seeing higher returns. They justify that attitude by pointing to low U.S. MTBE utilization rates-an average 63.6%-in 1988-90. Many bankers also believe the U.S. Environmental Protection Agency will delay gasoline reformulation by 1 year if U.S. oxygenate supplies prove inadequate.
Nojaidi blames low U.S. utilization levels on the lack of butane feedstock and not lack of demand. Numerous projects are under way to increase butane production, but unless methanol producers commit to more capacity immediately, shortfalls of methanol feedstock are likely, he said.
"This does not address the underlying problem of creating an adequate supply of MTBE to oxygenate U.S. gasoline and replace lead in European gasoline. Even if the EPA pushes oxygenation back 1 year, it merely delays the problem and doesn't eliminate it."
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
