VACHERIE — Days ahead of a state visit by China’s president, an event that will undoubtedly spark discussion about China-U.S. trade, officials with Yuhuang Chemical Co. said Friday they expect construction of the first phase of a $1.85 billion methanol complex in St. James Parish to start in late October or early November.
Company, state and parish officials celebrated the impending construction of the Mississippi River complex in a ceremony Friday at St. James Parish High School with the Chinese company’s global chairman, Wang Jinshu. Wang is one of 15 Chinese business executives attending a forum next week in Seattle where Chinese President Xi Jinping will speak and Chinese and U.S. business leaders will talk about improving business ties between their nations. The stop in Seattle is part of Xi’s weeklong visit to this country and with President Barack Obama as U.S. business officials worry China is curbing their access to its markets, according to Bloomberg and the South China Morning Post.
Speaking inside a school gym emblazoned with “Wildcat Country,” officials said the plant is Yuhuang’s first investment outside mainland China, the largest investment by a Chinese company in the Gulf Coast and a sign of increasing business ties between Louisiana and China.
“This project will be mutually beneficial for the long-term interests for our country and the development of China-U.S. relations,” said Wang, who spoke in Mandarin Chinese and had a translator repeat his comments in English.
Once the entire complex is finished, Wang said, it will be the largest methanol plant in Louisiana and likely end up sending all its production back to China.
In a brief interview through his translator, Wang, whom Forbes describes as a billionaire and regional Communist Party official, said the groundbreaking Friday and Xi’s state visit next week were just good timing.
Announced last year and one of several new methanol facilities in Louisiana taking advantage of low natural gas prices, the facility is expected to create 400 permanent jobs with an average salary of $85,000 a year, as well as 2,100 temporary construction jobs at the peak.
The first phase will produce 1.9 million tons per year of methanol. Company officials expect the phase, projected to cost $750 million, to be finished in the first quarter of 2018.
Yuhuang Chemical, the Houston-based U.S. subsidiary of Shandong Yuhuang Chemical Co., closed on the purchase of 1,300 acres of sugar cane fields along River Road last month. The company has signed key design, engineering and construction contracts and also sealed a 20-year deal for natural gas through Transcontinental Gas Pipe Line.
“The key thing is, you get a pipeline, you get gas. We got it,” said Charlie Yao, president and CEO of Yuhuang Chemical.
In conjunction with the plant, Air Liquide will build a $170 million air separation unit on Yuhuang’s site to supply oxygen. Air Liquide has licensed Yuhuang technology that uses oxygen to turn natural gas into methanol.
A liquid with the consistency of gasoline, methanol is a hydrocarbon derivative widely used as an intermediate feedstock to make other chemical products, including many plastics, but is flammable and toxic.
Company officials have said that creating methanol is an efficient way to access cheap U.S. natural gas and ship it to China, rather than rely on more expensive gas sources in China.
Analysts say the company has drawn some minor fire in the Chinese press over its environmental record, but state Department of Environmental Quality officials said earlier this year that was not a major consideration in approving the plant’s air permit. DEQ officials said the company must comply with state standards.
When asked Friday, Wang said his facility would absolutely meet state and federal environmental rules.
Barry J. Naughton, a University of California, San Diego, professor who studies the Chinese economy, said major economic trends are driving Chinese investment in the U.S. and Europe as China’s economy slows.
A 2015 report from a federal commission that tracks the national security implications of U.S.-China trade said total Chinese assets from direct foreign investments nearly doubled between 2011 and 2014 to $640.2 billion.
Naughton said companies in China face internal incentives to diversify their assets around the world as protection against unforeseen political and economic changes in China.
He added that creating methanol probably would be an effective way to access U.S. natural gas. He called it unrealistic, due to high cost, environmental regulation and trade barriers, to think a Chinese company could win permits to export U.S. natural gas back to China.
Naughton said that overall, Chinese investment is a good trend but also one to be watched.
“If they didn’t have a Communist authoritarian government, it would be a trend that is 100 percent positive,” Naughton said. “They’re coming up in the world and so it’s a good thing, but, of course, their system is opaque and sometimes corrupt and so, of course, we need to be extra careful.”
Those sorts of concerns weren’t to be found Friday at St. James High. Local and state officials credited Yao’s decision in early negotiations to buy St. James High School, which is next to the future complex, to allow that facility and others to move forward. Yuhuang will use the school for administration.
School Superintendent Alonzo “Lonnie” Luce said in an interview earlier this week the school system could not have supported “building a plant that close to school.”
“Without the school being sold, I don’t think any of this economic development would have happened,” he said.
For instance, Formosa Petrochemical Corp. of Taiwan is looking at adjacent land for a nearly $9.4 billion complex.
The $10.1 million sale of the school is in negotiations, Luce said, but Yuhuang officials put down a $500,000 deposit after voters approved a $56 million bond issue earlier this year to build a replacement high school and do other school improvements.
Yuhuang is waiting to start work until sugar cane is harvested from 250 acres eyed for the first phase, Yao said.
He said the future construction site will be about 1.5 miles from the high school on the rear of the 1,300 acres.
Luce said he is hopeful high school construction can start in February and be done in a year, in time for Yuhuang’s production start up.
Still a rural part of St. James where big farm tractors ride the highway, the new complex’s location sits among majestic plantation homes and black communities with roots to the Civil War era. Amongst that are industrial tank farms. Change is coming.
A few members of the family that had owned Yuhuang’s 1,300 acres for 100 years watched Friday as Yao, Wang and others posed for photographs under a tent where the ceremonial dirt turning had just finished.
“It’s kind of bittersweet, but it was the right thing to do,” said Sonny Graugnard, 65, as his wife, Stevie, stood nearby.
“You know it was just a great opportunity for the family. It really was, and I think it’s also a good opportunity for the community and the state. So you just got to turn that page.”