China's CAS plans gas-to-methanol plant on U.S. West Coast

BEIJING (Reuters) - China’s CAS Holdings, an investment arm of China’s Academy of Science, is looking to put $2 billion into turning natural gas into methanol on the U.S. West Coast and shipping the fuel to Chinese factories and chemical makers, Chinese executives said.

Wu Lebin, chairman of CAS Holdings, told Reuters last week the venture is part of a plan his company is leading to build a supply chain for methanol, potentially China’s next alternative industrial and transport fuel.

The project, to be located at Kalama Port in the U.S. state of Washington on the Columbia River, has applied for state and federal government permits, said a separate CAS official, without giving a timeline on when the approvals are expected.

An engineering unit of China National Petroleum Corp (CNPC) [CNPET.UL] is carrying out front-end engineering design work for two 1.8 million tonne-per-year gas-to-methanol lines that will cost about $2 billion, said Zhang Laiyong, a vice president of the unit, China Huanqiu Contracting & Engineering Corp.

The Kalama project could offer the world’s second-largest oil consumer another alternative low-carbon fuel and further diversify its fuel choices.

Wu acknowledged, however, that opposition from local environmentalists worried about carbon emissions has caused several delays in launching the project, developed by CAS unit Shanghai Bi Ke Clean Energy Technology Co Ltd (CECC).

Initially, CEEC will begin with a 600,000-tpy plant, using ultra-low emission technology, Wu said, adding that methanol shipped from the U.S. West Coast will be cheaper than that produced in western China from coal.

“We picked Kalama because of its access to the best abundant gas supplies from both America and Canada, and it’s a third closer to China compared to the Gulf of Mexico,” he said.

China is the world’s largest consumer of methanol as a chemical feedstock, and CAS already operates an 8 billion yuan ($1.2 billion), 1.3 million-tpy plant in east China that makes olefins from methanol.

CAS also wants to drive use of methanol as a transportation fuel for cars and ships. Transport consumption, though, is tiny compared with gasoline and diesel, with greater usage held up because national standards have not been set for methanol use and concerns over safety and tax issues.

Kalama could also feed millions of industrial boilers under a government plan to cut down coal use, with Beijing-Tianjin-Hebei region alone able to consume 10 million to 12 million tonnes of methanol a year , said Zhang Zhiyuan, chief scientist of Shenzhen Zhenghe Energy Co, a developer of boiler fuels.

Automaker Geely Auto has led China’s push to use methanol in cars, with one plant able to make 100,000 units a year in northern Shanxi province.

A factory that can make 300,000 methanol-fueled cars a year is due online at end-2018 in southwestern Guizhou province, said Jin Xianyang, a senior Geely engineer.

($1 = 6.6185 Chinese yuan)

Reporting by Chen Aizhu; Editing by Tom Hogue