World’s second largest methanol producer to invest in over $1bn Ta'ziz facility in the UAE

Exclusive: The facility in Ruwais is being built by Adnoc and ADQ in partnership with Proman

David Cassidy, chief executive of Proman, the world's second largest methanol producer. Photo: Proman

The UAE's first methanol production facility being developed in Ruwais is likely to cost between $1.8 billion and $2bn, and could potentially be expanded to meet growing demand globally, especially in the marine sector, according to the chief executive of Proman.

The world's second-largest methanol producer, Proman, is collaborating with Adnoc and Abu Dhabi holding company ADQ to develop the facility.

Total investment required for the project would be based on the technology used, said David Cassidy.

"It's an industry accepted practice that a methanol plant costs about $1,000 per installed tonne. We're looking at a 1.8 million tonne per year facility here, so the rough [investment] number is $1.8bn to $2bn.

"We are looking very carefully with Adnoc and ADQ at the technology selection, including not only future proofing, but also trying to make this project as low carbon intensive as possible, which may make it slightly more expensive," he told The National.

The natural gas to methanol facility, coming up at the Ta'ziz Industrial Chemicals Zone in Ruwais, is aimed at meeting growing global demand for the commodity.

"Abu Dhabi has a very competitive investment environment. I think that the government's approach is very strategic and [it has a] long-term view, which really suits us very much and fits in well with our values," Mr Cassidy said.

"Geographically speaking, for the development of the regional demand for chemical applications, but also going forward with the marine fuel demand, we think it's a great strategic location. So the project certainly ticked a lot of boxes and we think [it] is an advantaged project compared to other locations worldwide."

Methanol, a key product in the chemical industry, is mainly used for producing other chemicals, such as formaldehyde, acetic acid and plastics.

Its production has nearly doubled in the past decade, with about 98 million tonnes produced a year, the International Renewable Energy Agency (Irena) said in a report last year. Under current trends, production could rise to 500 million tonnes a year by 2050, it said.

One of the major factors driving the market is the increasing demand for methanol-based fuel, especially in the shipping industry, which is seeking cleaner alternatives to reduce its carbon footprint. Late last year, one of the world's largest shipping companies, Maersk, revealed the design of eight 16,000 20-foot equivalent units (TEUs) container vessels powered by carbon-neutral methanol. The series is expected to save around 1 million tonnes of annual carbon dioxide emissions, the company said.

Proman has also collaborated with Stena, a privately owned shipping company operating approximately 140 vessels, to jointly develop a retrofit and supply solution powered by methanol.

The uptake of methanol in the shipping sector has been gradual because of the lack of understanding about its benefits, according to Mr Cassidy.

"We have been working very hard with a number of large shipping companies to try and improve their understanding of the product, including pricing. And we do think that we've found a mechanism that will allow the industry to manage its costs, which are obviously very competitive," he said.

"In addition to that, I think we've reached an inflection point. And there is a general belief that there will also be carbon pricing or some kind of carbon taxation that comes in, which effectively drives users more towards methanol where that could close that gap and make methanol even more economically attractive than conventional fuels.

"So I think there's a number of things that have brought us to where we are today [including] working more closely with the industry, but also getting them better educated to understand the product and the general tone from the global population as well as governments. All of that is driving us in one direction," he added.

Methanol demand is increasing above the rate of global gross domestic product, especially in the developing world. While it is being used as an automobile fuel in some countries such as China and Israel, its adoption as a road fuel has not yet been maximised, according to Mr Cassidy.

While the current supply can scale to meet demand during the transition phase, production will need to be increased if the marine sector's pivot towards methanol gathers pace.

"We believe that together with Adnoc and ADQ, there is a ... very good opportunity to build multiple phases to this project [in Ta'ziz]. So we don't have to stop at 1.8 million tonnes, and in particular, if there's a new demand source, we feel that ... we'll be able to [stand] as one of the leading lights in this transition and bring plentiful supply into the marine sector," Mr Cassidy said.

A greenfield project of this scale usually takes three to four years to be fully ready and begin commercial production. "But if everything goes smoothly, then you don't [have to] wait until the end of the first project before rolling out phase two, three and four," he said.