Methanex CEO, John Floren, says the company continues to work towards a long term gas contract.

President and chief executive officer of Methanex Corporation, John Floren, has told an investor conference in Louisiana, USA that his company is prepared to pay higher prices for natural gas in an effort to restart its Titan methanol plant in T&T, but not so much that it makes losses when prices are low.

Floren told the conference last week: “The economics of the gas will be different from the economics we have traditionally enjoyed with Titan. So we will pay a little bit more for the gas, but we want to sign a take or pay contract to invest the tens of millions of dollars we have to, to get the plant restarted, we would want to be cash positive through the cycle, so that’s our goal, and we won’t sign a contract that assures losses during the bottom end of the cycle and that’s part of the challenge that we are having with the Government, as the Government renegotiates with the upstream, they certainly know the downstream’s position. It is not only ours but our competitors, the ammonia guys and LNG.”

The Titan methanol plant has been down for almost two years as Methanex could not reach agreement with the National Gas Company (NGC) over the issue of price. It has led to several workers losing their jobs.

Ian Cameron, Methanex senior vice president, finance and chief financial officer of the company who also has responsibility for its T&T asset, told the conference that there is commitment by all those in the value chain to get the Titan plant up and running. He admitted that the challenge had to do with the price and availability of natural gas as this country continues to suffer from shortages.

He explained: “So the challenge in Trinidad is gas, so I was down in Trinidad 12 days ago, there was a big energy conference in Trinidad, and it was all about the future, and just as background Trinidad is a country fairly reliant on oil, gas and petrochemicals, and LNG and it’s a big part of the economy, and as a big picture concept, the government is very incentivised to make sure all these operations are sustainable over the number of years and you can really feel that energy.”

Cameron added: “When I was in Trinidad I met the senior people in government, NGC and also some of the CEOs of upstream and all of them are very committed to ensure the investment and to continue to ensure all the assets in Trinidad and operating. That’s the goal, the challenge is timing, there are a lot of contractual relationships that are converging about the same time, so the upstream contracts are expiring in the next year or two, and the contracts with the LNG producers are expiring in the next year or two, the same with many of the petrochemical operations as well.

“There are a lot of things that need to happen as well in order for the gas contractual regime to work quickly, so that’s the challenge, but as I say, the Government and the upstream are very incentivised to somehow figure out how we find a way to share the economic rent that we think is available, between the upstream, NGC, the government, and downstream.”

In the circumstances Cameron said he was “cautiously optimistic” that Methanex will be successful in getting Titan up and running. Floren and the rest of the Methanex executive are predicting strong methanol demand and constrained supply scenarios that are likely to lead to continued strong prices for the commodity. Good news no doubt for T&T.

He said; “The methanol industry is expected to experience demand growth, limited addition in supplies in the next five years which drive a favourable industry outlook. This supply demand dynamic should support pricing. We also have the potential to further increase that capability with improved gas availability in Trinidad, New Zealand and Chile.”

Floren revealed that Methanex controls 13 percent of the global market-twice the size of its next closest competitor.

He said the company has a global presence across all key markets and has in the last 10 years returned US $2 billion to investors and invested US $3 billion to grow the business.

Rich Summer, Methanex global head of marketing said the company estimates the global methanol market at between 85 and 90 million tonnes with three broad areas of uses for the product.

1) ↓Traditional chemical applications (50 per cent of demand)

2) ↓Methanol to Olefin (15-20 per cent)

3) ↓Energy related applications (30 to 35 per cent) MTB and bio diesel as examples.

He said Methanex was seeing strong demand in chemical applications and this usually mirrors growth in GDP rates. Summer noted that as the world has had strong GDP growth, so too has the demand for methanol for chemical applications.

There has also been strong transportation demand growth in the last two years with the need for cleaner applications, which has been helping methanol demand growth.

Summer told the conference, “So overall we are seeing strong demand and obviously we are continuing to monitor a lot of the global economic headwinds that are out there to see what impact that can have on forward demand growth.”

“Over a five-year period, taking a 3 per cent growth rate, we would see that the industry needs about 14 million tonnes of new supply to balance the market.”

Summer explained that China’s effort to reduce green house gas emissions meant more methanol being used in applications like cooking and transportation fuels.

Summer said the shipping industry was likely to play a major role in increasing demand for methanol as a clean burning fuel.

“We expect this to continue to gain interest and momentum, so we say there are 65 dual fuel vessels, within 2025/26, these are vessels, including our own 19 vessels, that are actually on order and will be in the water by those dates.

“You will see the big name here is Maersk and Maersk has 13 container ships on order and we are starting to see a lot of interest across different segments in the marine space, container ships, dry bulk, ferry, cruise lines, tug and barge, are all looking at that.”

Summer told the investment conference.

He explained that the outlook for supply is not very good in the short term with some new supply to come from Malaysia and Iran, but noted that Iran is very uncertain because of plant technology issues and limited gas availability.

“Firm new supplies are likely to be insufficient to meet growing demand and the industry will need to operate at higher rates to close the market.

“There are a number of other projects in the Middle East, Africa and Russia but we feel a lot of those are at very early stages…When we see the industry balance going forward we look at it as a really tight market,” Summer posited.

He said to meet the increased demand you will have to get more supplies out of markets like Trinidad , but there are gas supply challenges in doing that.