The construction of a $2.2 billion methanol plant in St. James Parish was suspended in late April because of the economic downturn from the coronavirus pandemic.
South Louisiana Methanol LP sent a letter to the Louisiana Department of Environmental Quality on April 22 about the project hitting the pause button and requested an extension from the agency for its permits. Construction is on hold for an indefinite period, the company said.
“As a result of the nonessential business 'stay-at-home order,' we have shut the project down and are navigating the impact that (the coronavirus) and the oil price crash have had on the energy and chemical sector," the company said in a statement, noting that it remains committed to its St. James Parish plans.
South Louisiana Methanol is a joint venture between New Zealand-based Todd Corp. and SABIC US Methanol, the Houston-based subsidiary of Saudi Arabia’s SABIC.
South Louisiana Methanol already spent $300 million on the project, but has been making progress at a slower pace than it expected. The plant would produce about 2 million tons of methanol each year.
“The global methanol demand that will emerge post COVID-19 is uncertain at best,” Paul Moore, CEO of South Louisiana Methanol, said in the DEQ letter.
The project will be further delayed because it is seeking new project partners and a new debt-financing package, according to the company.
“This must all occur while the methanol market is at or near bottom of cycle,” Moore said.
However, the company does expect to resume construction, which began in December 2018.
The company is also waiting on approval of a modification to its air permit before it can sign agreements with new partners. The company’s permit has already been extended before.
The project is expected to create 75 new jobs and support up to 800 construction jobs in Louisiana.
Environmental activists, who have been pushing against new chemical plants, are requesting that the Louisiana Department of Environmental Quality deny the company’s permit extension.
“A company cannot hold onto a PSD permit indefinitely hoping that one day market conditions will be right so it can attract investors and begin construction in earnest,” said Corinne Van Dalen, attorney for New Orleans-based Earthjustice in a letter to DEQ sent in early May.
Two other major construction projects are also on hold during the economic downturn.
In early April, Canadian methanol manufacturer Methanex Corp. deferred $500 million of capital spending on its third $1.4 billion methanol plant in Geismar for the next 18 months. Formosa has halted construction on its $9.4 billion St. James plant.