July 31, 2014 / 9:15 AM / 4 years ago

Chinese firm plans $1.85 bln shale gas-based chemical plant in U.S.

BEIJING, July 31 (Reuters) - A private Chinese chemical firm plans to build a $1.85 billion plant by the Mississippi River to make methanol out of shale gas, becoming one of the latest foreign investors to capitalize on the U.S. shale boom.

Over the next five to 10 years, as many as a dozen world-scale, gas-based plants are expected to start up in the United States, including some built by Asian firms like Formosa Petrochemical Corp, to leverage on cheap shale gas as feedstock, according to research consultancy Wood Mackenzie.

Yuhuang Chemical Inc., a Texas-based unit of China’s privately-run Shangdong Yuhuang Chemical (Group) Co. Ltd., plans a methanol plant with per day production of 5,000 tonnes in St. James Parish of Louisiana State, according to a company official and a press release.

Methanol can be used to manufacture plastics and paints. It can also be used for blending into motor fuel.

The new plant, located south of Baton Rouge, Louisiana, aims to start construction in 2016 and targets completion at no later than 2018.

“This facility’s location fits well with our strategy to leverage the advantage that natural gas feedstock provides,” Charlie Yao, CEO of Yuhuang Chemical, was quoted in a press release from office of Louisiana State Governor earlier in July.

A Shandong-based official with Yuhuang Chemical’s parent company declined to say how Yuhuang would finance the investment.

Yuhuang has picked China Huanqiu Contracting & Engineering Corp., a engineering subsidiary of China’s top energy group CNPC, to do the engineering job, according to the press release.

Yuhuang Chemical, set up in 2012, has secured an option to purchase more than 1,100 acres (445 hectares) of land for the project near the Mississippi River.

Most of the project’s methanol will be exported for use in the parent company’s production of downstream chemicals in China, with approximately 20 percent to 30 percent of the methanol to be sold to North America, according to the press release.

The parent company, chemicals producer Shangdong Yuhuang Chemical (Group) founded in 1986, had fixed asset of 9.5 billion yuan ($1.5 billion) and revenues of 22.4 billion yuan in 2012, according to the company’s website. (Reporting by Beijing newsroom; Editing by Matt Driskill)

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