Mitsubishi Gas to invest $1.76 bn in methanol

Mitsubishi Gas Chemical Co, the world’s fourth-biggest methanol maker, is investing about 200 billion yen ($1.76 billion) over three years expanding overseas production to achieve a 30% increase in pretax profit.

Mitsubishi Gas targets pretax profit of as much as 65 billion yen as early as the year ending March 31, 2010, from 50 billion yen last fiscal year, said President Hideki Odaka.

The Tokyo-based company is building a new methanol plant in Saudi Arabia, and plans plants in Venezuela and Brunei.

Odaka is confident Mitsubishi Gas can win market share from competitors who face narrowing margins because of high natural gas costs. Methanol prices in Asia have doubled in the past five years.

Mitsubishi Gas’s business tie-up with Saudi Arabia on gas supplies has allowed the company to keep its spending on the raw material almost unchanged for 30 years.

”˜”˜With our new plants we can stay competitive,’’ Odaka said in an interview on July 6. ”˜”˜We’ll benefit even if methanol prices drop by half.’’

Mitsubishi Gas was the first Japanese company to set up a chemical plant in Saudi Arabia. It started making methanol in the Middle East nation in 1983. The price of gas Saudi Arabia offered the company then ”˜”˜is still our cost now,’’ Odaka said.

Japan Saudi Arabia Methanol Co, in which Mitsubishi Gas holds a 47% stake, has a joint venture with Saudi Arabia. The venture, Saudi Methanol Co, can produce 3.3 million tonne (mt) a year and plans to expand capacity to 5 mt by the first quarter of 2008.

Mitsubishi Gas plans to double its methanol capacity to 8.5 mt a year, from 4 mt now. Demand for the light alcohol used for coatings and plastics is estimated to grow about 3% a year, Odaka said.

Global demand may increase to 43.2 mt in 2010, from 34.6 mt in 2005, according to data compiled by the company. Sales in Asia will account for about 40% of worldwide demand in 2010.

Mitsubishi Gas is partnering with the Brunei government and Itochu Corp on a project in Brunei that may cost more than $3 billion. The plant will be completed in the first quarter of 2009. Mitsubishi Gas has plans to build an 0.85 mt methanol plant in Venezuela, in addition to an existing 0.73 mt facility.

It’s also studying a $2 billion project in China. ”We haven’t decided yet whether to go ahead with the China project,’’ Odaka said.

”We want to build the Chinese plant because demand there is soaring,” he added. ”We’re just waiting for China’s approval.”