Methanex says Geismar 3 methanol project in Louisiana on hold due to market uncertainty
Petrotahlil — Canadian methanol producer Methanex is putting development plans for its Geismar 3 methanol project in Louisiana on hold for up to 18 months in light of the bearish market conditions stemming from the coronavirus pandemic, the company said Wednesday.
"We believe that deferring major capital spending on our advantaged Geismar 3 project and minimizing near-term spending is a prudent decision in the current environment," John Floren, CEO of Methanex, said. "We have ample liquidity today with approximately $800 million of cash on the balance sheet and we continue to evaluate all capital and operating spending as we navigate this challenging environment."
The company's decision to delay development of the project will result in a deferment of $500 million in capital spending as well as the suspension of construction activity and procurement of non-critical equipment and bulk materials.
The decision follows Methanex's announcement in mid-March to idle its Titan methanol facility in Trinidad and Tobago as well as its Chile IV plant in Cabo Negro, effective Wednesday, for an indefinite period due to weak methanol demand.
The Geismar 3 project is slated to be Methanex's third methanol plant in Louisiana, adjacent to its existing Geismar 1 and Geismar 2 facilities, and will have an estimated production capacity of 1.8 million mt/year.
US spot methanol values have declined 35 cents/gal since reaching a 10-month high on February 28 of 104 cents/gal, falling to an assessed value of 69 cents/gal FOB USG on Tuesday, according to S&P Global Platts data. The 34% decrease in the assessed front-month domestic spot methanol value has coincided with significantly weaker front-month NYMEX WTI crude futures in the wake of demand destruction from the pandemic as well as the pricing dispute between Saudi Arabia and Russia.
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