Chesapeake Energy has signed a 10-year agreement
to supply all of the natural gas required for Methanex's 1
million tpy methanol plant in Geismar, Louisiana, the companies
said late Thursday.
Commencement of natural gas deliveries will coincide with the
startup of the plant, which is expected by the end of 2014.
"We are thrilled to have entered into this agreement with
Chesapeake, the second largest natural gas producer in the US,"
said John Floren, president and CEO of
Methanex. "This contract will enhance our ability to
reliably supply quality product to our US customers for at
least the next 10 years."
The upcoming Geismar plant is a relocation project from Chile.
"The agreement is structured so that the natural gas price is
linked to the methanol price, and both Methanex and Chesapeake
will share in the risks and rewards resulting from the changing
price of methanol over the decade of this
contract," added Floren.
"This gas pricing formula, in addition to the capital cost
advantage of relocating a methanol plant as compared to a
new-build facility, enables the project to be profitable across a
broad range of methanol prices."
Floren noted that a 10-year contract in place for 1
million tpy of methanol production reduces the
company's exposure to short-term natural gas price
fluctuations, thereby lowering the natural gas price risk
for the site if the company decides to relocate a
second plant to Louisiana.
Methanex expects to make a decision during the first half of
2013 on whether to proceed with a second relocation project.
"We are excited to support the ongoing revitalization of the
US manufacturing sector through our long-term gas supply
arrangement with Methanex, the world's leading methanol producer," said James
C. Johnson, Chesapeake's senior vice president of
"The unique structure of this transaction provides return
certainty and price diversification for Chesapeake while
providing margin protection and price stability for Methanex.
Furthermore, Methanex's investment and plant relocation to
Louisiana demonstrates the compounding economic and employment
benefits to be derived from the shale gas revolution.
"We believe this is truly a 'win-win' arrangement for both