DEMAND FOR METHANOL WILL STRAIN CAPACITY

World methanol demand by 1994 will strain production capacity, increasing plant utilization to an average 92%, a Houston consulting company predicts. During 1990-94, worldwide expansions of methanol capacity will amount to about 3.6 million metric tons, a 16% increase for the period, Crocco & Associates Inc. says. Meantime, methanol demand will increase by about 4.3 million metric tons, or 24%.

Aug. 19, 1991

2 min read

World methanol demand by 1994 will strain production capacity, increasing plant utilization to an average 92%, a Houston consulting company predicts.

During 1990-94, worldwide expansions of methanol capacity will amount to about 3.6 million metric tons, a 16% increase for the period, Crocco & Associates Inc. says. Meantime, methanol demand will increase by about 4.3 million metric tons, or 24%.

Crocco, a member of DeWitt Consulting Group, says the bulk of higher methanol demand will result from increasing production of methyl tertiary butyl ether (MTBE) required to phase down gasoline lead content in several countries. Fuel reformulation in the U.S., driven by new clean air rules requiring increased amounts of oxygen in gasoline, also will be a major factor in increased MTBE demand, Crocco says.

NEW PLANTS

On the supply side, Crocco counts 450,000 metric tons/year of methanol Petralgas began producing this year in New Zealand. Worldscale methanol plants being built in Trinidad and Saudi Arabia are expected to go on stream in 1992, and three small plants are planned in the U.S.

But as methanol demand grows, Crocco says, the ability of traditional producers to finance construction of new, capital intensive, methanol plants will become questionable because of low rates of return.

"Investors are not willing to support such facilities unless they feel assured of obtaining a return on their investment, and the political risk will be minimal," Crocco says. "Without these assurances, methanol utilization rates will increase and will push market prices upward to reinvestment values."

When methanol prices reach sustained levels high enough to interest investors in building new plants, construction will begin, Crocco says.

"However," the company concludes, "since it takes considerable time to engineer, plan, finance, and construct a worldscale methanol plant, the global methanol market could end up in a serious tightness by the middle of the 1990s."