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PwC Up front | Issue 5 | Harnessing technology

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24 Up front Summer 2014 Methanol: a primer Vancouver-based Methanex is the world's top producer, marketer and supplier of methanol, a chemical building block used in the manufacture of a huge variety of consumer and industrial products and, increasingly, as an alternate energy source. As a fuel source, methanol has four advantages over conventional petroleum products: 1. lower cost: made by combining steam and plentiful natural gas, it's less expensive than petroleum- based fuels. 2. less environmental impact: compared to petroleum fuels, methanol is a cleaner-burning energy source. 3. Can be stored, transported and used in existing petroleum products infrastructure. 4. Can be processed from any carbon source. in 2013, Methanex invested in Carbon Recycling international, an icelandic company that has developed a way to tap into carbon dioxide emissions from the country's geothermal power plants – a novel application. the cost is higher than using natural gas, but there's a tangible benefit. "if you can make a product from Co 2 that has energy value, then it could be something that is quite interesting in the future," Methanex President and Ceo John Floren says. fuel: same engine, different sets of injectors and two different fuel sources." Methanex currently employs approximately 1,100 people and has plants in six countries: Canada, Chile, Egypt, New Zealand, Trinidad and Tobago, and the U.S. To stay at the forefront, the company has adapted to changing circumstances. For example, its Chilean plants are traditionally dependent on Argentinian natural gas. But in 2007, when Argentina was forced to import energy to meet domestic needs, Argentinian gas suppliers halted all natural gas exports; overnight, 80 per cent of the Chilean feedstock disappeared. Instead of letting the facilities sit idle, Methanex decided to relocate two of its four existing Chilean plants to Louisiana, closer to readily available supplies of gas. "It's quite innovative," says Floren, adding that although other methanol plants have been cut up and shipped in pieces, nobody else has attempted to move large sections of a plant intact. The logistics were daunting, but the payoff was worth it. "To relocate a plant from Chile to Louisiana, we can do it for about two-thirds the capital of a new build and in about half the time," says Floren, adding that a new plant takes about five years to complete. The first Louisiana plant is targeted to be operational later this year, the second by early 2016. In 1995, to transport methanol to world markets, Methanex formed Waterfront Shipping Co. Ltd., a wholly owned subsidiary whose 18 vessels specialize in safe, responsible and reliable transportation, making up the world's largest methanol tanker fleet. (Seven more ships with dual-fuel capabilities are on order.) In the past, Methanex had deployed Waterfront's fleet solely to ship methanol. But when circumstances changed in Chile, it had to improvise, repurposing the vessels to carry cargo other than methanol. "Forty per cent of what we carry today is not methanol," Floren says, adding that the ships now often carry gasoline or diesel on backhaul routes. "That's made our shipping costs much more effective." Hurdles remain. Finding skilled employees – as Methanex grows, it's looking to add between 700 and 800 people in the next three to five years – will be the most pressing challenge. Another is the deft management of market growth, which is now increasing by 8 per cent annually. "The fastest- growing markets for methanol are in the energy sector, and as energy applications grow, they create very large demand," Floren says. "You want to have orderly growth on both the demand and supply side, to grow the supply at the same time as the demand grows." Uf In conversation with John Floren Iain Morris is a tax Services Partner in the Vancouver office of PwC. iain has extensive experience in corporate tax consulting primarily for clients in the consumer and industrial products sectors. he is also the lead relationship partner for Methanex. The leaders Methanex moves one of its Chilean methanol plants to louisiana by ship.

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